Boston, MA -- (SBWIRE) -- 06/10/2014 -- Algeria is set for a surge in petrochemicals output growth this year, provided plans go ahead as scheduled. With a lacklustre domestic market, producers will be reliant on export markets to fill the order books.
Algeria's petrochemicals market is likely to come under increasing pressure with slower growth in demand. BMI's Country Risk team has become more negative on the near-term macroeconomic outlook for the country, having revised down its 2014 GDP growth forecast from 4.4%, to 3.2%. Indeed, we now feel that the economy will grow below potential over the medium term. Given continued delays in investment in the energy sector, net hydrocarbons exports will remain flat over the coming years. The government's inability to liberalise the economy and declining public revenues will also constrain both private and public investment. We project real GDP growth averaging just 3.6% over the 2014-18 period. Against this deteriorating backdrop, we feel that it is right to adopt a cautious near-term stance. We now believe that new vehicle sales could fall by around 3% in 2014, before a recovery begins in 2015.
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- This quarter, BMI is less upbeat about the prospects for growth in the Algerian petrochemicals market in response to a downgrade in GDP growth and the continued slow pace of industrial growth. We now feel that the economy will grow below potential over the medium term. Declining hydrocarbon exports will ensure that the economy expands below potential, a trend which we expect to continue over the medium term.
- While the domestic market will absorb some of the rise in output that is due to come from new plants, the successful expansion of the sector is predicated on growth in the European market, which has remained in the doldrums. New capacity will still be rudimentary by contemporary standards and will lack sufficient processing capacity, leaving the country dependent on imports of semi-finished and finished plastic products.
- Algeria has focused on low added-value production, relying on commodity chemicals that are highly price responsive to market fluctuations and easily undermined by capacity elsewhere in the world. The industry is some distance from competing on equal terms with European petrochemicals producers with regard to product diversification.
- Having risen from 10th to ninth place in BMI's Middle East and Africa Petrochemicals Risk/Reward Ratings (RRRs) matrix in the previous quarter as a result of its score rising 7.6 points, Algeria's score and rank remains unchanged this quarter. Its score has stabilised at 48.2 points. However, this could be put at risk if there are further delays to the Arzew petrochemicals complex and expected growth in methanol capacity in 2014. It lies 0.7 points behind Turkey and 3.5 points ahead of Egypt.
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