September 26, 2018 / 1:20 PM / a year ago

UPDATE 2-Algeria sees 2019 economic growth at 2.6 pct vs 4 pct this year - govt document

(Adds more details)

By Hamid Ould Ahmed

Sept 26 (Reuters) - Algeria’s government expects the economy to grow by 2.6 percent in 2019, down from the 4 percent it has forecast for this year, due to lower spending, a document seen by Reuters showed.

The government sees inflation reaching 4.5 percent next year, down from its 5.5 percent projection for 2018, according to the document, part of the draft budget for 2019.

OPEC member Algeria relies heavily on oil and gas, which account for 60 percent of the budget and 94 percent of its export revenue, despite promises to launch reforms and diversify the economy.

Algeria’s oil and gas export earnings should reach $33.2 billion in 2019, down from the $34.37 billion target for 2018, the document said, without elaborating.

But the government has said falling energy output and growing domestic consumption are pushing down exports.

Overall energy consumption rose 7.1 percent in the first quarter of 2018 from a year earlier, according to the energy ministry.

As a result of the decline in energy revenue, the government plans to cut spending by 1.5 percent in 2019 after a 25 percent rise this year, in a bid to rebalance its finances, which have been hit in recent years by a fall in global crude prices.

Foreign exchange reserves are also expected to fall further, reaching $62 billion in 2019, the government said in the document, down from the $85.2 billion forecast for the end of this year and $193 billion in mid-2014 when oil prices started falling.

The North African country is now benefiting from a recovery in crude prices, with its energy earnings reaching $22.021 billion in the first seven months of this year, a 15.23 percent rise from a year earlier.

But the government said it is still under financial pressure, with a large proportion of energy revenue being used to pay for imports of goods due to poor domestic production.

It expects the goods import bill to reach $44 billion in 2019, up from $43.5 billion forecast for this year. (Reporting by Hamid Ould Ahmed; Editing by Hugh Lawson)

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