![]() ![]() 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). Domestic revenue mobilization, improved oversight of public enterprises and rationalization of subsidies are essential. The key challenge pointed out by the IMF is for Djibouti to adjust its growth model to reduce dependence on debt-financed investments while supporting an inclusive recovery. 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. The 2023 budget, balanced and 2.9% higher than the previous one, focuses on implementing fiscal and structural reforms, strengthening social sectors and economic recovery, and supporting purchasing power. Inflation will be limited by the peg of the Djibouti currency to the U.S. Inflation increased from 1.2% in 2021 to 6.6% in 2022, and it is expected to decline to 1.9% in 2023 before rising again to 3% in 2024 (IMF). However, improvement in customs and transhipment revenues will depend on the Ethiopian situation, and in the context of the war in Ukraine, public spending on mitigating inflationary pressures will remain high (Coface). Fiscal deficit narrowed from -2.9% GDP in 2021 to -1.1% GDP in 2022, and it is expected to remain stable in 2023 (-1.2%) and 2024 (-1%) (IMF). 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). Debt service tripled in 2022 to almost 5% GDP following the expiration of the G20 Debt Service Suspension Initiative, increasing budget pressures (IMF). Due to large investments in infrastructure projects, public debt increased from 46% GDP in 2021 to 50.1% GDP in 2022, and it is expected to continue rising to 53.5% GDP in 2023 and 54.3% GDP in 2024 (IMF). In addition, higher commodity prices and regional drought eroded households’ purchasing power and reduced government revenue (IMF). In 2022, Djibouti’s economy, which was just recovering from the consequences of the COVID-19 pandemic, was hit by the fall in port traffic driven by the conflict in Ethiopia. ![]() According to IMF forecasts, GDP growth is expected to strengthen to 5% in 2023 and 6% in 2024, subject to the stabilisation of the situation in Ethiopia. In 2023, the country's activity should still be driven by rising demand for logistics and transhipment services and the continuation of transport and port infrastructure projects (Coface). Economic growth slowed down from 4.8% GDP in 2021 to 2.5% GDP in 2022, according to IMF’s latest estimates. 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.Īfter rebounding from the global health crisis thanks to the recovery of regional and international trade, Djibouti's economy was hit by the consequences of the war in Ukraine, the conflict in Ethiopia and trade disruptions in China.
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