Factors Influencing Economic Growth in Algeria

Analysis of the Impact of Private Sector Credit Government Spending, and Trade Openness Using the ARDL Model

Abstract

This study examines the factors of economic growth in Algeria, and highlights the
impact of Private Credit, government spending, and trade openness on the Algerian economy. The
research aims to analyze and estimate the impact of the mentioned factors on the economic growth
in Algeria using the ARDL model. Annual data were collected for the period from [1980] to
[2022], and analyzed using the ARDL model to estimate the relationship between private credit,
government spending, trade openness, and economic growth. The results indicate that the negative
impact of credit provided to the private sector on economic growth due to the failure of the
Algerian banking system to support the private sector, while the increase in liquid liabilities
indicates the inefficiency of channeling financial resources and the reluctance of banks to provide
loans. While government spending negatively affects economic growth despite increased spending,
finally, the opening of trade promotes growth but makes the Algerian economy hostage to
fluctuations in oil prices. Based on these results, it is recommended to strengthening the economic
environment: improving laws for property rights and anti-corruption, promoting investment in
education and information technology, developing banks and financial infrastructure to promote
financial inclusion and enhance confidence in the banking system.