Despite continued nonhydrocarbon dynamism, Algeria’s GDP growth moderated in early 2023, while high inflation per￾sisted. Recent swings in oil and gas prices highlight the challenges that hydrocarbon dependence poses for macroeconomic stability. Amid declining oil and gas export prices, the current account surplus is shrinking after peaking in 2022, and the fiscal deficit is expected to widen. Priori￾ty reforms include strengthening the macroeconomic policy framework, open￾ing more space for the private sector, and improving public service delivery.Key conditions and challenges Algeria’s economy is dependent on oil and gas which account for a fifth of GDP, four-fifths of exports, and two-fifths of budget revenues. Double-digit fiscal and current account deficits persisted before the pandemic, eroding foreign exchange reserves, and causing fast debt accumu￾lation and large-scale monetization while leading to currency depreciation and im￾port reduction policies.The Russian Federation’s invasion of Ukraine and Europe’s efforts to shift away from Russian gas supply have raised oil and gas export prices, generated record trade surpluses for Algeria, and reduced the budget deficit despite a steep rise in current spending. It also presented oppor￾tunities for reviving foreign energy invest￾ment in Algeria, after years of declining export capacity amidst stagnating produc￾tion and rising domestic consumption.