Djibouti Economic Monitor, Fall 2024

Industry Overview - Djibouti's economy rebounded in 2023 with GDP growth estimated at 6.7%, driven by increased demand for port and logistics services from Ethiopia [17] - The volume of goods handled in Djibouti's ports increased by 14% in 2023 compared to 2022, with Ethiopian demand accounting for 80% of the total volume [31] - The number of containers handled in Djibouti's ports exceeded 890,000 units in 2023, a 36% increase from the previous year [31] Economic Performance - Inflation stabilized at 3.8% in December 2023, down from a peak of 11% in June 2022, due to government measures and a slowdown in global oil and food prices [17] - The service sector remained the leading contributor to GDP, contributing 4.6 percentage points in 2023, while the secondary sector contributed 1.6 points [37] - Private consumption and investment were sustained by government support measures and the resumption of public works projects [39] Public Finances - Djibouti's budget remains under pressure due to increased tax exemptions, which reached 19% of GDP in 2022, reducing tax revenues to 11.4% of GDP [17] - The budget deficit widened to 1.9% of GDP in 2023, driven by increased capital expenditure and rising interest payments [45] - Public debt reached 67% of GDP in 2023, with state-guaranteed debt of public enterprises accounting for 76% of the total [53] External Sector - Djibouti's current account balance improved in 2023, with a surplus of over 32%, driven by increased exports of goods and services [17] - The trade balance recorded a surplus of nearly 80 billion DJF, a 64.5% year-on-year increase [17] - Ongoing disruptions in the Red Sea have led to a 39% increase in container volume handled at Djibouti's port in March 2024 compared to November 2023 [17] Monetary Sector - Djibouti's currency board coverage remains adequate, with gross foreign assets falling by 14.7% in 2023 to USD 496 million [62] - The banking sector showed resilience, with an increase in credit to the private sector and a significant reduction in non-performing loans [17] - International reserves have decreased by 14.7% compared to the previous year, reflecting cash flow tensions [17] Medium-Term Outlook - Annual GDP growth is expected to average 5.1% from 2024 to 2026, supported by foreign trade and major public works projects [17] - Risks to the medium-term outlook include fiscal deterioration, regional tensions, and climate shocks [7] - Djibouti's growth model faces vulnerabilities, including heavy dependence on global maritime transport and exposure to regional conflicts [17]