The Impact Of Small And Medium-sized Enterprises On Gross Domestic Product In Algeria

Abstract

This paper quantifies the relationship between the expansion of small and medium enterprises (SMEs) and Gross Domestic Product (GDP) in Algeria over the period 2002– 2022. The analysis is motivated by the country’s objective of diversifying economic activity beyond hydrocarbons and by the policy emphasis placed on SME promotion through dedicated institutions and support schemes. Using annual data compiled from different institution, the study estimates a log‑linear model by ordinary least squares (OLS) in EViews. The preferred specification indicates a positive and statistically significant elasticity of GDP with respect to the number of SMEs (β≈0.304). In practical terms, a 1% increase in the number of SMEs is associated with an average increase of about 0.30% in GDP. Model fit is high (R²≈0.971). Residual diagnostics suggest no serial correlation at the 5% level, homoscedasticity, and approximate normality. The findings support the view that strengthening the SME ecosystem can contribute to aggregate output, provided that policy focuses not only on increasing the number of firms but also on improving their survival, productivity, and access to finance and markets.