Economy of Djibouti

The economy of Djibouti is derived in large part from its strategic location on the Red Sea. Djibouti is mostly barren, with little development in the agricultural and industrial sectors. The country has a harsh climate, a largely unskilled labour force, and limited natural resources. The country’s most important economic asset is its strategic location connecting the Red Sea and the Gulf of Aden. As such, Djibouti’s economy is commanded by the services sector, providing services as both a transit port for the region and as an international transshipment and refueling centre.

From 1991 to 1994, Djibouti experienced a civil war which had devastating effects on the economy. Since then, the country has benefited from political stability. In recent years, Djibouti has seen significant improvement in macroeconomic stability, with its annual gross domestic product improving at an average of over 3 percent since 2003. This comes after a decade of negative or low growth. This is attributed to fiscal adjustment measures aimed at improving public financing, as well as reforms in port management.

Despite the recent modest and stable growth, Djibouti is faced with many economic challenges, particularly job creation and poverty reduction. With an average annual population growth rate of 2.5 percent, the economy cannot significantly benefit national income per capita growth. Unemployment is extremely high at over 43 percent and is a major contributor to widespread poverty. Efforts are needed in creating conditions that will enhance private sector development and accumulate human capital. These conditions can be achieved through improvements in macroeconomic and fiscal framework, public administration, and labour market flexibility.[6]

Djibouti was ranked the 177th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.[7]

Economy of Djibouti
The container terminal at the Port of Djibouti
Port of Djibouti
CurrencyDjiboutian franc (DJF)
Calendar year
Trade organisations
AL, AU, CEN-SAD, IGAD
Statistics
GDPIncrease$3.64 billion PPP (2017 est.)[1]
GDP growth
6.5% (2015), 6.5% (2016),
7.0% (2017e), 6.5% (2018f) [2]
GDP per capita
Increase$3,600 PPP (2017 est.)[1]
GDP by sector
Agriculture 2.8%
Industry 21.0%
Services 76.1% (2017 est.)
3% (2017 est.)
Population below poverty line
23%
Labour force
294,600 (2012 est.)
Labour force by occupation
Agriculture 10%
Industry 21.2%
Services 75.7%
Unemployment40% (2017 est.)
Main industries
Dairy
Fishing
Salt
Construction
Mining
171st (2017)[3]
External
Exports$155.5 million (2017 est.)
Export goods
Reexports, Hides and skins, Coffee, Scrap metal
Main export partners
 Ethiopia 38.8%
 Somalia 17.1%
 Qatar 9.1%
 Brazil 8.9%
 Yemen 4.9%
 United States 4.6% (2017 est.)[4]
Imports$1.172 billion (2017 est.)
Import goods
Machinery and Equipment, Foodstuffs, Beverages, Chemicals, Petroleum products, Consumer Goods
Main import partners
 China 42%
 Saudi Arabia 14%
 India 4%
 Indonesia 6% [5]
Public finances
85% (2017 est.)
Revenues$615 million
Expenses$860 million
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Economic performance

Djibuswalm
Bus down the central market in Djibouti City.

Djibouti has experienced stable economic growth in recent years as a result of achievements in macroeconomic adjustment efforts. Fiscal adjustment measures included downsizing the civil service, implementing a pension reform that placed the system on a much stronger financial footing, and strengthening public expenditure institutions. From 2003 to 2005, annual real GDP growth averaged 3.1 percent driven by good performance in the services sector and strong consumption. Inflation has been kept low (only 1 percent in 2004, compared with 2.2 percent in 2003), due to the fixed peg of the Djibouti franc to the US dollar. However, as mentioned above, unemployment has remained high at over 40 percent in recent years. Djibouti's gross domestic product expanded by an average of more than 6 percent per year, from US$341 million in 1985 to US$1.5 billion in 2015.

The government fiscal balance is in deficit because the government has not been able to raise sufficient tax revenues to cover expenses. In 2004, a substantial increase in expenditure resulted in a deterioration of the fiscal position. As a result, the government deficit increased to US$17 million in 2004 from US$7 million in 2003. But improvement in expenditure management brought down the fiscal deficit to US$11 million in 2005.[6]

Balance of payments

Djibouti’s merchandise trade balance has shown a large deficit. This is due to the country's enormous need for imports and narrow base of exports. Although Djibouti runs a substantial surplus in its services balance, the surplus has been smaller than the deficit in the merchandise trade balance. As a result, Djibouti's current account balance has been in deficit. There is very limited information for Djibouti’s current account; the country’s merchandise trade deficit was estimated at US$737 million in 2004.[6]

Regional situation

Positioned on a primary shipping lane between the Gulf of Aden and the Red Sea, Djibouti holds considerable strategic value in the international trade and shipping industries. The facilities of the Port of Djibouti are important to sea transportation companies for fuel bunkering and refuelling. Its transport facilities are used by several landlocked African countries for the re-export of their goods. Djibouti earns transit taxes and harbour fees from this trade, these form the bulk of government revenue. Threats of pirates patrolling the Gulf of Aden, off the coast of Somalia, with the intentions of capturing large cargo ships, oil, and chemical tankers has created the need for larger nations such as the United States, France, and Japan to embed logistics bases or military camps from which they can defend their freight from piracy. The port of Djibouti functions as a small French naval facility, and the United States has also stationed hundreds of troops in Camp Lemonnier, Djibouti, its only African base, in an effort to counter terrorism in the region.[6] Recently China has stated they are in talks to build “logistics facilities”[8] in Obock to provide support peacekeeping and anti-piracy missions near Somalia and the Gulf of Aden. Additional international presence will increase both Djibouti’s economic value as well its strategic importance in the region.

Macro-economic trend

This is a chart of trend of gross domestic product of Djibouti at market prices estimated by the International Monetary Fund with figures in millions of Djiboutian francs.

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1980 54,969 177.89 Djiboutian Francs 44
1985 64,988 177.56 Djiboutian Francs 49
1990 80,388 177.84 Djiboutian Francs 70
1995 88,456 177.62 Djiboutian Francs 90
2000 97,965 177.79 Djiboutian Francs 100
2005 124,770 177.73 Djiboutian Francs 111

For purchasing power parity comparisons, the US dollar is exchanged at 76.03 Djiboutian francs. Mean wages were $1.30 per person-hour in 2009.

The following table shows the main economic indicators in 1980–2017.[9]

Year 1992 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP in $
(PPP)
1.20 Bln. 1.14 Bln. 1.22 Bln. 1.58 Bln. 1.70 Bln. 1.84 Bln. 1.98 Bln. 2.03 Bln. 2.14 Bln. 2.34 Bln. 2.50 Bln. 2.67 Bln. 2.88 Bln. 3.10 Bln. 3.34 Bln. 3.63 Bln.
GDP per capita in $
(PPP)
2,349 2,049 1,915 2,153 2,263 2,373 2,490 2,480 2,544 2,710 2,814 2,921 3,066 3,211 3,369 3,559
GDP growth
(real)
0.6 % −3.5 % 0.7 % 3.1 % 4.8 % 5.0 % 5.8 % 1.6 % 4.1 % 7.3 % 4.8 % 5.0 % 6.0 % 6.5 % 6.5 % 6.7 %
Inflation
(in Percent)
3.4 % 4.9 % 2.0 % 3.1 % 3.5 % 5.0 % 12.0 % 1.7 % 4.0 % 5.1 % 3.7 % 2.4 % 2.9 % 2.1 % 2.7 % 0.7 %
Government debt
(Pct. of GDP)
58 % 60 % 59 % 57 % 59 % 60 % 52 % 45 % 43 % 43 % 39 % 34 % 32 % 31 %

Investment climate

Background

Quartier européen à Djibouti
European Quarter, Djibouti City.

Djibouti’s economy is based on service activities connected with the country's strategic location and status as a free trade zone in the Horn of Africa. Two-thirds of inhabitants live in the capital and the remainder of the populace is mostly nomadic herders. Low amounts of rainfall limit crop production to fruits and vegetables, and requiring most food to be imported. The government provides services as both a transit port for the region and an international transshipment and refueling centre. Djibouti has few natural resources and little industry. All of these factors contribute to its heavy dependence on foreign assistance to help support its balance of payments and to finance development projects.

An unemployment rate of 50 percent continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35 percent over the last seven years because of recession, civil war, and a high population growth rate. Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.[10]

Openness to foreign investment

The government of Djibouti welcomes all foreign direct investment. Djibouti's assets include a strategic geographic location, an open trade regime, a stable currency, substantial tax breaks and other incentives. Potential areas of investment include Djibouti's port and the telecommunications sectors. President Ismail Omar Guellehh first elected in 1999, has named privatization, economic reform, and increased foreign investment as top priorities for his government. The president pledged to seek the help of the international private sector to develop the country's infrastructure.

Djibouti has no major laws that would discourage incoming foreign investment. In principle there is no screening of investment or other discriminatory mechanisms. That said, certain sectors, most notably public utilities, are state owned and some parts are not currently open to investors. Conditions of the structural adjustment agreement recently signed by Djibouti and the International Monetary Fund stipulate increased privatization of parastatal and government-owned monopolies. There are no patent laws in Djibouti.[11]

As in most African nations, access to licenses and approvals is complicated not so much by law as by administrative procedures. In Djibouti, the administrative process has been characterized as a form of 'circular dependency.' For example, the finance ministry will issue a license only if an investor possesses an approved investor visa, while the interior ministry will only issue an investor visa to a licensed business. The Djiboutian government is increasingly realizing the importance of establishing a one-stop shop to facilitate the investment process.[6]

Sectors

Trade

Sabaibdjib
A Saba Islamic Bank branch in Djibouti City.

Principal exports from the region transiting Djibouti are coffee, salt, hides, dried beans, cereals, other agricultural products, chalk, and wax. Djibouti itself has few exports, and the majority of its imports come from France. Most imports are consumed in Djibouti and the remainder goes to Ethiopia and Somalia. Djibouti's unfavourable balance of trade is offset partially by invisible earnings such as transit taxes and harbour dues. In 1999, U.S. exports to Djibouti totalled $26.7 million while U.S. imports from Djibouti were less than $1 million. The City of Djibouti has the only paved airport in the republic.

Tourism

In 2013, 63,000 foreign tourists visited Djibouti, Djibouti City is the principal tourist destination for visitors, revenues from tourism fell just US$43 million in 2013.

See also

References

  1. ^ a b "Djibouti". International Monetary Fund. Retrieved 1 October 2014.
  2. ^ "World Bank forecast for Djibouti, June 2018 (p. 152)" (PDF). World Bank. Retrieved 11 September 2018.
  3. ^ "Ease of Doing Business in Djibouti". Doingbusiness.org. Retrieved 24 January 2017.
  4. ^ "Export Partners of Djibouti". CIA World Factbook. 2013. Retrieved 11 May 2015.
  5. ^ "Economy of Djibouti". 2014.
  6. ^ a b c d e Country Watch
  7. ^ "Euromoney Country Risk". Euromoney Country Risk. Euromoney Institutional Investor PLC. Retrieved 15 August 2011.
  8. ^ "China has no military ambition in Djibouti - Global Times". www.globaltimes.cn. Retrieved 30 November 2015.
  9. ^ "Report for Selected Countries and Subjects". Retrieved 29 August 2018.
  10. ^ Country Watch
  11. ^ Bill Anderson

External links

Agriculture in Djibouti

Agriculture is the third economic activity in Djibouti. Agriculture makes up 3 percent of the wider economy value. Djibouti depends on imports in most foods. Climatic conditions and poor soils limit farm output, and domestic food production meets about 15% of demand. 10% of the Djiboutian workforce are employed in agriculture.

Banque pour le Commerce et l'Industrie – Mer Rouge

Banque pour le Commerce et l'Industrie – Mer Rouge (BCIMR) is a bank in Djibouti. It has a market share of around 45%, and is the largest bank in the Horn of Africa. BCIMR is a subsidiary of the French bank BRED Banque populaire, which owns a 51% share in the company. The Government of Djibouti and a Yemeni bank own the remaining 33% and 16% shares, respectively. BCIMR has a branch in Hargeisa, situated in the northwestern Somaliland region of Somalia.

Central Bank of Djibouti

The Central Bank of Djibouti (French: Banque Centrale de Djibouti) is the monetary authority of Djibouti. It is responsible for managing the country's currency, the Djiboutian franc, as well as the national foreign exchange position and accounting.

Dahabshil Bank International

Dahabshil Bank International (DBI), also known as the Dahabshil International Commercial Bank, is a bank headquartered in the federal republic of Somalia

Dahabshil Bank International is one of the main banks in Djibouti. It is a subsidiary of DGH Group Dahabshiil.The bank has access to substantial foreign direct investment from the Gulf region.

Djibouti and the International Monetary Fund

Relations between the International Monetary Fund and Djibouti began in 1978, at the time of Djibouti's membership. Since that time, Djibouti has taken out three different kinds of loans or credit lines from the IMF. A Stand-By-Credit, an Enhanced Structural Adjustment Facility, and Poverty Reduction and Growth Facility plan.

Djibouti and the World Bank

In 1980, Djibouti became a member of the World Bank Group (WBG). The WBG includes five different organizations: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Accounting for more than thirteen thousand projects across 173 countries, the WBG is one of the main lending facilities of the world. The WBG works together with governments and private sectors in order to enhance countries efforts towards development and poverty reduction.

Djiboutian franc

The Djiboutian franc (Arabic: فرنك‎) is the currency of Djibouti. Its ISO 4217 currency code is DJF. Historically, it was subdivided into 100 centimes.

Exim Bank (Djibouti)

Exim Bank (Djibouti) (EBD), also Exim Bank Djibouti SA or Exim Bank of Djibouti, is a commercial bank in Djibouti. The bank is one of the commercial banks licensed by the Central Bank of Djibouti, which is the country's central bank and national banking regulator.

List of companies of Djibouti

Djibouti, officially the Republic of Djibouti, is a country located in the Horn of Africa. Djibouti's economy is largely concentrated in the service sector. Commercial activities revolve around the country's free trade policies and strategic location as a Red Sea transit point. Due to limited rainfall, vegetables and fruits serve as the principal production crops, and other food items require importation. The gross domestic product in 2012 was estimated at $2.377 billion, with a real growth rate of 4.8% annually. Per capita income was around $2,700.

List of supermarket chains in Djibouti

This is the list of supermarket chains in Djibouti.

Al Gamil

Cash Centre Leader Price

Casino Supermarkets

Etablissement Ladieh

Napoleon Supermarkets

Nougaprix

SemiramisGrocery shopping in Djibouti is old-fashioned. Convenience stores, markets, street-corner vendors and food trucks still constitute the main outlets of consumer goods.

Mining in Djibouti

Mining and manufacturing in Djibouti accounted for 3 percent of the gross domestic product (GDP) in 2004, which stood at around $1.6 billion.

Djibouti has been known to produce occasional small quantities of clays, granite, limestone, marble, salt, sand and gravel, and crushed and dimension stone for domestic construction projects.

There was no cement production in the country; most imports came from Persian Gulf countries. Other mineral occurrences of potential economic interest included diatomite, geothermal fluids and mineral salts, gold, gypsum, perlite, petroleum, and pumice.

Salt was the only mineral produced in 2004. Extracted from evaporated pans by artisanal miners in the marshes of Tadjoura, salt production fell sharply from the 173,099 metric tons produced in 2001 to an estimated 30,000 metric tons in 2004. The government hoped to establish, by the end of 2002, a fiscal, institutional, and legal framework to support the development of domestic natural resources. The government also planned to promote the use of local materials in construction and public works. The outlook for the mineral industry was for little growth in the short run; constraints included small domestic markets, minimal known natural resources, and slow GDP growth.

Outline of Djibouti

The following outline is provided as an overview of and topical guide to Djibouti:

Djibouti – country located in the Horn of Africa. It is bordered by Eritrea in the north, Ethiopia in the west and south, and Somalia in the southeast. The remainder of the border is formed by the Red Sea and the Gulf of Aden at the east. Djibouti occupies a total area of just 23,200 km2 (8,958 sq mi). In antiquity, the territory was part of the Land of Punt. Djibouti is a multi-ethnic nation, with a population of over 790,000 inhabitants. The Somali and Afar make up the two largest ethnic groups. Both speak Afro-Asiatic languages, which serve as recognized national languages. Arabic and French constitute the country's two official languages. About 94% of residents adhere to Islam, a religion that has been predominant in the region for more than 1,000 years. Djibouti is strategically located near the world's busiest shipping lanes, controlling access to the Red Sea and Indian Ocean.

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