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Djibouti

Djibouti

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Key Facts

  • Capital: Djibouti
  • Region: East Africa
  • Official languages: French and Arabic
  • Independence Day: June 27, 1977
  • Area: 22,980 sq km
  • Total Population (2018): 0.96 million
  • REC membership: COMESA, CEN-SAD, IGAD
  • WTO membership: May 31, 1995
  • GDP (2018): US$ 2.956 billion
  • GNI per capita (2018): US$ 3 190
  • Currency: Franc

Economic overview

Real GDP growth has remained strong, estimated at 6% for 2019. From a demand point of view, it is driven by public investment in rail and port infrastructure. On the supply side, it should continue to be driven by the tertiary sector, notably trade with Ethiopia, which accounts for 80% of Djibouti’s port activities. Inflation is estimated at 2.2% for 2019.

The fiscal deficit is estimated at 14.2% of GDP in 2019, funded mainly by borrowing and foreign aid. The current account deficit is estimated at 12.5% of GDP in 2019, funded by foreign borrowing and foreign direct investment. At 35.8%, the level of poverty remains worrying. Income distribution is uneven with a Gini index of 0.42, and unemployment is estimated at 39.4%.

Real GDP growth should remain strong with 6% projected for 2020 and 6.2% for 2021. Inflation is projected to be 2% in 2020 and 1.8% in 2021. Thanks to Djibouti’s coastal location, the first African international electric railway line, linking Addis Ababa to Djibouti, has been operational since January 2018. The geothermal drilling currently under way should increase the supply of energy through public-private partnerships. The 4th Djibouti Household Survey of social indicators achieved in 2018, shows that approximately 57% of households had access to electricity in 2017, a gain of more than 7 percentage points from 2011 (49.8%). Chronic food insecurity affected 29% of the population in 2019.

The government has implemented three major policies that should boost economic momentum: The National Employment Policy 2014-24, which aims to develop the small and medium enterprises subsector, the Education Action Plan 2017-19, and the National Agricultural and Food Security Investment Plan 2016-20.

The fiscal deficit is projected to be 13.7% of GDP in 2020 and 13.5% of GDP in 2021. The current account deficit is projected to be 14.1% of GDP for 2020 and 15.1% of GDP for 2021. External debt is estimated at 102.9% of GDP in 2018, up slightly from 2017 (97.4% of GDP), due mainly to loans for financing large infrastructure projects. According to the latest IMF debt sustainability analysis, the country remains exposed to a high risk of debt distress.

The country’s main challenges are vulnerability to climate change, low factor productivity (labor and capital), little diversification of national production and exports, small domestic market (population of less than 1 million inhabitants), a longstanding unchanged GDP structure, low purchasing power, unequal distribution of income, high unemployment, and low institutional and human capacities reflected in weak project implementation.

Last updated: April 2020