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- GDP (PPP):
- $2.4 billion
- 4.8% growth
- 4.7% 5-year compound annual growth
- $2,677 per capita
- Inflation (CPI):
- FDI Inflow:
Djibouti’s economic freedom score is 55.9, making its economy the 118th freest in the 2014 Index. Its overall score is 2 points better than last year, with declines in financial freedom and trade freedom outweighed by improvements in six of the 10 economic freedoms including the control of government spending, business freedom, and labor freedom. Djibouti is ranked 20th out of 46 countries in the Sub-Saharan Africa region.
Over the 18 years in which Djibouti has been graded in the Index, its economic freedom has remained largely stagnant, with its overall score improving by only 1.5 points. Six of the 10 economic freedoms have increased, including investment freedom and the management of government spending, whose scores have recorded double-digit improvements, but the combined score gains have been largely offset by declines in property rights, business freedom, and fiscal freedom. Djibouti has been rated a “mostly unfree” economy throughout its history in the Index.
Effective implementation of deeper institutional reforms remains critical to sustaining dynamic economic growth and ensuring broad-based economic development. Systemic weaknesses linger in the protection of property rights and the enforcement of anti-corruption measures. The judiciary remains vulnerable to political influence.
President Ismael Omar Guelleh, whose multi-party, multi-ethnic coalition controls all levels of government, was re-elected by a wide margin in April 2011. Djibouti is strategically located at the mouth of the Red Sea, and its economy is centered on port facilities, the railway, and French, Japanese, and American military facilities. Djibouti is an international partner in combating piracy in the Gulf of Aden. The population is concentrated in the capital city. Food prices stabilized somewhat in 2012 but remain very high. Djibouti depends heavily on food imports, has few natural resources and little industry, and relies on foreign assistance to help support its balance of payments and finance development projects. A nearly 60 percent formal-sector unemployment rate and a lack of fresh water are ongoing challenges.
Efforts to curb corruption have met with little success. Power is heavily concentrated in the hands of the president. Public officials are not required to disclose their assets. Trials and judicial proceedings are time-consuming and subject to corruption and political manipulation. Protection of private property is weak. The judicial system is based on the French civil code, although Sharia law prevails in family matters.
Djibouti’s individual income tax rate is 30 percent, and its corporate tax rate is 25 percent. Other taxes include a property tax and an excise tax. The overall tax burden is 20.3 percent of GDP. Government expenditures amount to over one-third of the domestic economy, and public debt is close to 40 percent of GDP.
Administrative procedures have been streamlined, and the cost of launching a business has been reduced, but the minimum capital requirement to start a company remains high. Recent labor-market reform measures have not been fully enforced. The government continues to subsidize food and fuel and subjects a range of goods and services to price controls.
Djibouti’s average tariff rate is 17.6 percent, and other non-tariff barriers further constrain trade flows. Although laws do not generally discriminate against foreign investors, some sectors of the economy are restricted. The financial sector generates an increasing share of GDP. Despite establishment of new banks, the sector remains dominated by the two main banks.