Djibouti Economic Outlook

  • Driven by large investment projects, growth remained buoyant at 6.3% in 2016 and is projected to rise to 6.7% in 2017 and 6.8% in 2018.
  • After widening for two consecutive years, the budget deficit improved in 2016, but debt remained critical, with an economy focused on services, transport in particular.
  • To reach its potential, the economy will require structural change to improve the low density of the country’s economic fabric and its low level of diversification.

The Republic of Djibouti has experienced continuous economic expansion that has kept growth above 5% for several years, thanks mainly to investment in railway, port (the multi-purpose Port of Doraleh and the Port of Tadjourah) and hydroelectric infrastructure. The government plans to continue its ambitious infrastructure programme on the back of foreign investments, particularly from China. Chinese firms are engaged in the launching of a large industrial and commercial customs-free zone, in exploiting natural resources (fish, salt and energy) and in developing tourism. These investments may change the structure of the economy, which so far has focused on transport and related services, taking advantage of the country’s geostrategic position by the Gulf of Aden at the intersection of key corridors for shipping goods and oil. The government wishes to bolster this comparative advantage over its neighbouring countries by turning the country into a regional platform and hub for logistic, trading and financial services.

Driven by these large investment projects, growth increased to an estimated 6.3% in 2016 from 6.5% in 2015, and is projected to move on to 6.7% in 2017 and 6.8% in 2018. Despite this upturn, extreme poverty and unemployment remain endemic. Around 23% of the 1 million people in Djibouti live in extreme poverty, and this poverty rate has not fallen since 2002, while more than 48% of the working-age population are unemployed. Moreover, debt is becoming increasingly critical. The many public investments in infrastructure are financed partly by large non-concessional loans. The debt level rose to an estimated 79.6% of gross domestic product (GDP) in 2016 and is projected to top 81.5% in 2017, putting the country at high risk of over-indebtedness.

In March 2014, to put structural change of the economy on track and foster entrepreneurship, the government adopted a long-term strategic framework, Vision Djibouti 2035. The first medium-term product of this framework was the Scape strategy (Stratégie de croissance accélérée et de promotion de l’emploi), a launched in 2015. In the long run, the strategic framework aims to move Djibouti to the status of an emerging country by 2035, and in the short run, the Scape strategy aims to accelerate growth and create jobs.