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- GDP (PPP):
- $2.9 billion
- 6.0% growth
- 4.8% 5-year compound annual growth
- $3,051 per capita
- Inflation (CPI):
- FDI Inflow:
Djibouti has sought to transform itself into a regional trade, finance, and telecommunications hub. The economy is driven mainly by services, with industry accounting for less than 20 percent of GDP. Increased investment, particularly in construction and port operations, has led to relatively high growth, but onerous regulations still hinder private-sector development.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 56 (down 1.5 points)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 124th
- Regional Ranking: 24th in Sub-Saharan Africa
- Notable Successes: Investment Freedom and Monetary Freedom
- Concerns: Property Rights, Corruption, and Trade Freedom
- Overall Score Change Since 2012: +2.1
President Ismael Omar Guelleh, whose multi-party, multi-ethnic coalition controls all levels of government, was reelected to a third term in 2011 after getting parliament to change a constitutional prohibition on more than two terms. The opposition boycotted the polls. 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. The main port serves as an important staging point for international antipiracy operations, and Djibouti is active in the African Union’s AMISOM peacekeeping mission in Somalia. The country has few natural resources and imports most of its food, and the government relies on foreign assistance to pay its bills and finance development projects. With the recent conflict in Yemen, thousands of refugees have made their way to Djibouti.
Efforts to curb government corruption have met with little success. Power remains heavily concentrated in the hands of the president, and repression of political opposition has increased. Public officials do not have to disclose their assets. Judicial proceedings and trials are time-consuming, prone to corruption, and subject to political manipulation. Protection of private property is weak. Sharia (Islamic) law prevails in family matters.
The top personal 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. The overall tax burden equals 20.3 percent of total domestic income. Government spending amounts to 37.7 percent of total domestic output. Public debt has been reduced to below 50 percent of GDP, but the latest budget remains in deficit.
The regulatory system suffers from a lack of transparency and clarity, and the minimum capital requirement to start a company is costly. Recent labor-market reforms have not been fully enforced. Many goods and services are subject to price controls, and in 2015, the IMF again urged the heavily indebted government to replace costly subsidies for food and fuel with targeted assistance.
Djibouti’s average tariff rate is 17.7 percent. Djibouti is a member of the Common Market for Eastern and Southern Africa (COMESA), dedicated to “trade liberalization and customs co-operation.” State-owned enterprises distort several sectors of the economy. The financial sector generates an increasing share of GDP. Despite establishment of new banks, the sector remains dominated by the two main banks.