Government To Succeed In Containing Inflation

Despite the rise in global food commodity prices and the prospect of Ramadan increasing the demand for foods, and thereby keeping prices elevated, we maintain our long-held view that the Algerian government's subsidies will be successful in containing inflationary pressures. We therefore forecast consumer price inflation to average 4.0% in 2011, and to decrease slightly to average 3.0% throughout 2012. However, the government's ambitious spending plans announced for 2011, coupled with relatively limited resources, pose upside risks to our inflation forecasts, especially should prolonged protests cause disruptions in Algeria's hydrocarbons production cycles and wheat and grain prices rise increasingly more sharply in the coming months.

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