National economies in North Africa are heading into 2025 with bold economic ambitions. Across the region—made up of Morocco, Algeria, Libya, Mauritania and Tunisia—the aim is for growth in gross domestic product (GDP) of over 4%, higher than the global economy's projected 3.2% growth rate.
They will get help from generous budgets for development spending alongside reforms to increase revenues while cutting inflation and debt. Social programmes in health, education, direct subsidies, and wages will also play an important role.
But the best chance for success would be for the wars in Ukraine and the Middle East to end, which would help the global economy return to growth. That would ease pressure on key markets, including those for raw materials and energy, alongside trade routes for goods. There will also be hopes for better conditions for agriculture, with regular rainfall helping to boost production and address challenges over food security.
But North Africa is not a homogenous economic entity due to the complex series of interlocking political disputes. And there is serious international concern about the tensions, especially over disagreements between Algeria and Morrocco, and the threat that could be posed to economic growth and broader regional security and stability.
Moves away from cohesion and the integration of trade and economic ties across the region—and any pivot toward nationalism—could hold back growth by 2 to 3 percentage points, according to analysts.
Al Majalla now looks ahead to what could be a pivotal year for North African countries. They have allocated substantial budgets for 2025, which total around $253bn—$126bn for Algeria, $73bn for Morocco, $26bn for Libya, around $25bn for Tunisia, and $3bn for Mauritania.
Oil-exporting countries have a good chance of achieving high growth rates thanks to energy exports. However, this advantage comes with a warning, according to the International Monetary Fund (IMF), which says that “the absence of necessary reforms reduces the chances of transforming revenues into comprehensive development”. And that could have important implications for the labour market, debt levels and prices, the IMF added.
Algeria
Algeria is an oil exporter whose budget is the largest in terms of value, at $126bn. But there is a debt burden and a deficit estimated at $62bn. Finance Minister Laaziz Fayed said public debt will reach 17tn dinars (about $127bn) by 2025, equivalent to 50% of GDP. Although most of this debt is owed to local financial institutions or sovereign wealth funds, it is increasing strain on Algeria’s public finances, following a 16% drop in oil and gas revenues in 2023, totalling $50bn.
In the first nine months of 2024, oil and gas revenues were estimated at $34bn, according to Bloomberg, due to volatile prices on international markets caused by the series of wars and geopolitical crises.
Read more: Algeria’s ‘optimistic’ budget is the largest since independence
Some 60% of Algeria’s budget depends on oil and gas revenues, but they are no longer enough to cover the public debt and the financial deficit, estimated at 21.7% of the GDP. The budget report says: “Expected revenues will be around $64bn with a 1.9 % increase in energy exports.”
Morocco and Tunisia
Meanwhile, net energy importers, such as Morocco and Tunisia, could benefit from lower prices on international markets. They could also diversify sources of income by relying on sectors that add significant value to what they produce. Investing in industries relatively sheltered from geopolitical turbulence—industry, renewable energy, and services, for instance—would also help.
Labour markets and the social implications of high employment depend on the volume of agricultural production. It will be critical to economic recovery and reducing unemployment, accounting for about 14% of GDP in both countries.
For Morocco, international institutions recommend continued diversification. Industry now makes up 28% of the national GDP, which has helped it mitigate the impact of climate change and other global crises while keeping growth rates relatively stable at around 3% to 4%, also thanks to the early implementation of political and economic reforms. The Moroccan budget forecasts growth of 4.6%, an inflation rate of 2%, and a deficit of 3.5% for the coming year. In 2024, growth was 3.4%.
Read more: Only bold on paper? Morocco’s $73bn budget for 2025
Meanwhile, Tunisia expects growth to rise from 1.6% in 2024 to 3.2% in 2025, with revenues increasing by 5.7% based on an oil price of $77 per barrel. But it needs $8.83bn in financing, or 28bn dinars in local currency. Of that, 22bn dinars will come from the local financial market, although some observers warn that repeated government borrowing is putting strain on the banking sector. The cost of servicing public debt is estimated at around $6bn, or $3.2bn in domestic debt and $2.72 bn in foreign obligations.
Read more: Frustrated by the West, Tunisia looks East to help its economy
Libya
The International Monetary Fund puts the conditions facing Libya’s budget in clear terms. Its report estimates that: “Algeria needs an oil price between $110 and $119 per barrel at a time when the price ranges between $70 and $80, depending on demand and international developments”.
Ibrahim Maamri, professor of economics at the University of Tizi Ouzou in eastern Algeria, believes that “dependence on energy sources threatens budget revenues in the medium term due to fluctuations in international markets.”
Libya is expected to lead the Arab and North African countries, helped by its oil industry coming back. The resumption of the production of crude oil in the east of the country could drive overall growth to 13.7%. The end of the crisis at the central bank in Tripoli will also help.
Libya’s oil production rose to 1.5 million barrels per day (bpd) in the fourth quarter of 2024, an increase of about 0.5 million bpd and production is expected to reach 2 million bpd in 2027.
But the authorities in both western and eastern Libya have been accused of weak governance, mismanagement, and inefficiency in public spending. The Libyan Audit Bureau previously revealed that: “Oil exports were sold in exchange for fuel and were not included in government revenues.”
Abdul Hamid Fadil, a professor of economics at Misrata University, told the newspaper Asharq Al-Awsat that: “Only $20 bn reached the state treasury instead of $28bn.”
For its part, the UN mission reiterated a: “Need to utilise oil resources to achieve development and prosperity for the Libyan people and ensure economic and financial stability for the country.”
Oil accounts for 97% of government revenues, 94% of exports, and 60% of GDP. Paradoxically, despite increased oil revenues, the per capita income of Libyans is 50% lower than it was ten years ago after conflict spread across the country. According to the World Bank, “Had it not been for the civil war, the Libyan economy would have grown by 68% over a decade.”
Mauritania
In the southernmost tip of North Africa, Mauritania is preparing to enter the club of gas exporters. Its Grand Tortue Amim (GTA) field and the offshore Birallah gas field in the Atlantic will increase hard currency revenues and help create fiscal space to meet medium-term development needs.
Read more: Offshore gas discoveries help put Mauritania on the map
The IMF predicts growth of 4.2% for 2025, with inflation of 4% and a current account deficit of $960mn. For some time now, Mauritania has served as a bridge between North Africa and the Sahel countries in terms of trade through a corridor linking it with Mexico through the border region around Guerguerat.
The country's geographical location has made it strategically important for security, illegal migration, crime prevention, and counter-terrorism, drawing attention and support from the US and Europe.
Militarisation and spending
Unlike regional economic blocs such as the Gulf Cooperation Council or the European Union, the Arab Maghreb Union is facing a growing crisis of confidence.
There are disagreements, conflicts, and disputes between the nations which make up the region, creating a political climate of instability. This has, in turn, led to increased defence spending, which is expected to reach over $50bn next year.
Algeria has allocated $25bn for military spending, representing one-fifth of the general budget, making it the largest military spender in North Africa, ahead of Morocco and Egypt. But in the face of its large budget deficit, the means of financing this spending is unclear, although the government has ruled out external borrowing. That has stoked speculation it may resort to using national foreign exchange reserves, estimated at $70bn.
Morocco has earmarked around $13.5bn, or 133.4 dirhams in local currency, to renew the army’s equipment and support the defence industry. Total military defence spending will be around £23bn. The kingdom plans to acquire what its budget bill referred to as “advanced aircraft and modern air defence systems.”
International concern
International institutions are concerned that what amounts to an arms race in the region will destabilise it, just as North Africa needs cooperation to take it toward comprehensive economic development.
A recent report by the international Brussels-based Crisis Group said: “Political and economic conflicts between the countries of the southern Mediterranean are hampering development across North Africa and threatening potential violent conflict.”
It called for restraint and the continued application of diplomatic pressure to contain tension, warning that: “Any escalation of the situation in North Africa and the Sahel could have a negative impact on security, stability, and supplies within the European Union. And any breakdown in security could have consequences in the areas of illegal migration, human trafficking, and the spread of cross-border crime.”
There are some hopes that the return of Donald Trump to the White House as president of the US in January could help ease tensions or at least prevent them from worsening.
Read more: Trump’s economic calculations loom over North Africa
Boosting living standards
Across North Africa, national budgets aim to improve individual income and purchasing power by funding schemes to subsidise prices and cut income tax while investing in development and infrastructure.
There is also a trend to exempt some food imports from customs and excise duties to curb inflation and protect prices. But the economic and social impact on citizens will vary from one country to another, depending on the nature of the political climate, local governance the level of integration into the global economy, and the contribution made to international trade.
