Djibouti: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After being hit by the global financial crisis, drought and rising raw material prices, Djibouti's economy regained a positive momentum in 2019, growing by 7.5%. However, due to the outbreak of the Covid-19 pandemic, GDP growth decelerated sharply, reaching only 1% in 2020 (IMF). According to IMF estimates, economic growth recovered to 5% in 2021 and should further strengthen to 5.5% in 2022 and 6% in 2023 (IMF), driven by rising demand for logistics and transhipment services and the resumption of public and private investment in infrastructure (Coface).

In 2021, Djibouti’s economy benefited from the recovery in international and regional trade, after being hit by the drop in external demand and by the prevention and containment measures taken domestically in response to the pandemic (IMF). The crisis and policy response (with expenditure equivalent to 2.6% of GDP) lead to a widening of the fiscal deficit to -1.7% GDP in 2020 (Coface). The deficit slightly decreased to -1.6% GDP in 2021 and is expected to further narrow to -1.3% GDP in 2022 (Coface). Despite the end of crisis support measures, increased capital investment spending will temper budget deficit reduction. Due to large investments in infrastructure projects, public debt increased from 50.2% GDP in 2015 to 73.3% GDP in 2020 (Coface). While declining, it was estimated at 71.5% GDP in 2021 and forecast at 70% GDP in 2022, still putting the country at a high risk of over-indebtedness (Coface). IMF estimates debt levels at 42.3% GDP in 2021, 40.3% GDP in 2022 and 39.6% GDP in 2023. Almost entirely external, public debt is mainly owed to China (70% of total public debt in 2021), but the country is seeking to diversify its sources of financing in favor of less costly multilateral sources (Coface). Inflation decreased from an estimated 1.8% in 2020 to 1.2% in 2021, and it is expected to remain stable at 2% in 2022 and 2023 (IMF). The monetary policy based on pegging the national currency to the US dollar results in low and stable inflation. Food and energy prices could nonetheless exert upward pressure (Coface). Promoting a strong and inclusive recovery and preserving medium-term debt sustainability is a priority. The government will also pursue the Vision Djibouti 2035 strategy, which aims to transform the country into a middle-income economy and a logistics and commercial hub for East Africa. Other challenges include poor governance, the increasing dependency on Ethiopia and China, and the widening gap separating the modern portion of the economy and the archaic informal portion on which the population is largely dependent (Coface). In addition, the deterioration of economic and security climate among Djibouti's major economic partners (Yemen, Somalia and Ethiopia) poses risks to the country's economy, which accommodates an increasing number of refugees fleeing the conflict in Yemen.

Despite positive economic indicators, Djibouti remains a poor country with a high unemployment rate of 28.39% of the total labour force in 2020 (World Bank, modeled ILO estimate), vast inequalities and a low level of education. The population as a whole draws little benefit from the income derived from hosting foreign garrisons and port activities, considering that around 16% of the population is living below the poverty line of 1,90 USD per day and more than a fifth of the population lives in extreme poverty (World Bank). Djibouti is ranked 166/189 in the UN Human Development Index.

Monetary Indicators	2016	2017	2018	2019	2020
Djibouti Franc (DJF) - Average Annual Exchange Rate For 1 GBP	239.96	228.73	237.11	222.13	227.85

Source: World Bank - Latest available data.

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Latest Update: February 2023