The Algerian government's decision to hike salaries in the public sector was premature and will lead to a price shock for the domestic economy, said an International Monetary Fund (IMF) delegation on Wednesday (October 18th) in Algiers. Delegation head Erik de Vrijer insisted that the government should think of new measures to stimulate industrial production to more effectively boost economic activity.

The IMF said gross domestic product is likely to grow 3% this year, as the government's projection of 5% growth is too optimistic. The group also forecasted production of hydrocarbons would not exceed 5%, as compared to last year's 5.5 per cent. Despite the robust performance of the oil sector, the IMF believes Algeria's economy remains vulnerable, mostly because of the still weak level of private investments.

IMF criticises Algeria on public employee salary hikes