DETERMINANTS OF PUBLIC EXPENDITURE IN ALGERIA: A MACROECONOMIC PERSPECTIVE

This article analyzes the determinants of public spending in Algeria over the period 1980–2023, using a Vector Error Correction Model (VECM) to assess the short- and long-term relationships between public spending, gross domestic product (GDP), inflation rate, exchange rate, unemployment rate, external debt, and oil-related taxation. The long-term results reveal a significant positive relationship between public spending and GDP as well as the unemployment rate. In contrast, inflation, the exchange rate, and oil taxation have a negative impact on public spending. In Algeria, the national economy heavily depends on the hydrocarbon sector; revenues from oil exports enable the country to meet growing social needs. This dependence exposes the economy to inflationary pressures, particularly during periods of falling commodity prices and depreciation of the national currency. In the short term, the model shows that only oil-related taxation and GDP have a significant influence on public spending. This situation calls for an urgent revision of Algeria’s economic policy.