Page 9 - Azerbaijan State University of Economics

Aboubaker Khoualed, Taher Makhloufi, Ahmed Makhloufi, Elyas Luqman: The Impact
of Foreign Direct Investment (FDI) on Economic Development: The Case of Algeria

Afterwards, in 2016, oil prices rose again, and with the improvement of
macroeconomic balances, the flow of FDI increased compared to 2015, reaching 1.47
billion USD in 2018. For the rest of the years, investment witnessed a decline,
reaching 751 million USD in 2022, due to the fall in oil prices and also due to the
global health crisis of COVID-19, which affected the economies of the world in
general.

Evolution of Economic Development Rates in Algeria
The following table shows the development rates of GDP (GDP) in Algeria during the
period from 1990 to 2022.

From table number (01), we observe that during the period 1990-1994, the
development of GDP was very low, and at times negative. This decline is attributed to
the oil crisis that occurred in the late eighties, which affected fuel prices, especially
since Algeria's economy heavily depends on the hydrocarbon sector.

This was accompanied by a decrease in currency value due to the deterioration of the
security situation resulting from the political crisis during that period. Then, between
1996 and 1999, GDP development increased compared to the previous period,
reaching 5.1% in 1998, due to the improvement in fuel prices. With the beginning of
the new millennium, as a result of numerous reforms introduced by the government
in the form of development programs such as the Economic Development Support
Program, Economic Recovery Program, and the Five-Year Development Program
which extended until 2014, development rates significantly increased along with the
rise in oil prices, where GDP development reached 7.2%, the highest rate during the
study period. The years 2008 and 2009 saw a decrease to 2.4% and 1.6% respectively,
due to the global financial crisis in 2008 that affected the global economy. In the
following years, the rates remained relatively stable until 2020, where it sharply
dropped to a negative value of -5.1% due to the direct and indirect impacts of the
global health crisis COVID-19. As for the last two years of the study period, GDP
development rates witnessed an increase of 3.4% and 3.1% respectively compared to
2020. This is due to the significant increase in economic activity, especially in the
hydrocarbon sector.

TESTING THE IMPACT OF FDI ON ECONOMIC DEVELOPMENT IN
ALGERIA DURING 1990-2022
This section discusses the role played by FDI in influencing economic development
in Algeria, utilizing econometric methods for proof through the use of the
Autoregressive Distributed Lag (ARDL) model .

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