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- GDP (PPP):
- $2.5 billion
- 5.0% growth
- 4.6% 5-year compound annual growth
- $2,746 per capita
- Inflation (CPI):
- FDI Inflow:
Djibouti’s economic freedom score is 57.5, making its economy the 112th freest in the 2015 Index. Its overall score is 1.6 points better than last year, reflecting improvements in six of the 10 economic freedoms, including business freedom, freedom from corruption, and investment freedom. Djibouti is ranked 18th out of 46 countries in the Sub-Saharan Africa region.
Djibouti has achieved gradual improvements in economic freedom over the past five years. Since 2011, its economic freedom score has risen by 3.0 points, led by gains in freedom from corruption, government spending, monetary freedom, and investment freedom. Strategically located at the mouth of the Red Sea, Djibouti has developed as a vital port and transshipment terminal for international trade.
Nevertheless, Djibouti has remained “mostly unfree” throughout its history in the Index. Its integration with the world economy as a transshipment point contrasts sharply with a trade freedom score that sits well below the world average. Tariff and non-tariff barriers exacerbate well-known food security issues. Strategic attempts to reorient the economy toward financial services and communication are undermined by an increasingly onerous regulatory regime.
President Ismael Omar Guelleh, whose multi-party, multi-ethnic coalition controls all levels of government, was re-elected to a third term in 2011. One of Djibouti’s comparative advantages is its geostrategic location at the mouth of the Red Sea. Port facilities and the railway are key assets. Djibouti is also home to French, Japanese, and American military facilities. The main port serves as a key staging point for international antipiracy operations. Djibouti is active in the African Union’s AMISOM peacekeeping mission in Somalia. Djibouti has few natural resources and imports most of its food. The government relies on foreign assistance to pay its bills and finance development projects. In 2013, Guelleh announced that Djibouti would focus on improving and expanding its financial and communications sectors.
Despite tepid efforts to curb corruption, power remains concentrated in the hands of the president, and political repression increased in 2014. Public officials do not have to disclose their assets. Trials and judicial proceedings are time-consuming, prone to corruption, and politically manipulated. Protection of private property is weak. The judicial system is based on the French civil code, but Sharia law prevails in family matters.
The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Other taxes include a property tax and an excise tax. Overall tax revenue is equivalent to 18.9 percent of gross domestic product. Government expenditures equal 37.8 percent of domestic income, and public debt amounts to 35 percent of the gross domestic economy.
The regulatory system lacks clarity and efficiency. Launching a business remains burdensome, and the minimum capital required amounts to about twice the level of average annual income. A modern labor market has not fully developed. Several goods and services are subject to price controls. In 2013, the IMF urged the government to replace costly subsidies on food and fuel with targeted assistance.
Djibouti’s average tariff rate is 17.6 percent. Non-tariff barriers are relatively low for the region. Domestic and foreign investors generally receive equal treatment under the law, but investment in some sectors of the economy is restricted. The banking sector has expanded as more banks, particularly foreign banks, have entered the market and increased competition in recent years.