Set to arrive on Wednesday, July 16, Merkel's visit to Algeria comes just days after both nations' leaders attended the founding of the Union for the Mediterranean in Paris on Sunday.
During her two days of talks she will seek to put some immediate vitality into closer Mediterranean links, government sources in Berlin said.
She is to discuss with President Abdel-Aziz Bouteflika anti-terrorist policy, illegal migration of Africans to Europe and the lingering conflict in Western Sahara.
Algeria is important to Europe as the nation possessing 60 percent of Africa's natural gas reserves. It has huge foreign-exchange reserves and has solid growth prospects ahead of it, but was ravaged by a bloody conflict with rebels in the 1990s that left more than 100,000 dead.
A state of emergency declared in 1992 is still in force.
Energy, arms companies looking for deals
Companies represented in the Merkel business party include RWE and E.ON, two energy companies that are seeking licenses to gas fields.
Engineering group ABB and utility Gelsenwasser are seeking infrastructure contracts and an engineering consultancy is keen on the work of planning construction of Algeria's biggest mosque.
Arms companies Rheinmetall and Thyssen-Krupp will be offering German weaponry.
The sources said Merkel would continue in Algeria her practice when abroad of meeting with non-government groups to hear alternative views. Algeria remains dominated by the caste that led a war to gain independence from France in 1962 and by the military.
Merkel's Wednesday program includes meetings with religious leaders to ask about the place of Islam in Algeria. On Thursday she is set to meet with a panel of women leaders from business, the arts and media.