Real GDP growth has remained strong, estimated at 6% for 2019. From a demand point of view, it is driven by public investment in rail and port infrastructure. On the supply side, it should continue to be driven by the tertiary sector, notably trade with Ethiopia, which accounts for 80% of Djibouti’s port activities. Inflation is estimated at 2.2% for 2019.
The fiscal deficit is estimated at 14.2% of GDP in 2019, funded mainly by borrowing and foreign aid. The current account deficit is estimated at 12.5% of GDP in 2019, funded by foreign borrowing and foreign direct investment.
At 35.8%, the level of poverty remains worrying. Income distribution is uneven with a Gini index of 0.42, and unemployment is estimated at 39.4%.
Tailwinds and headwinds
Real GDP growth should remain strong with 6% pro- jected for 2020 and 6.2% for 2021. Inflation is projected to be 2% in 2020 and 1.8% in 2021. Thanks to Djibouti’s coastal location, the first African international electric railway line, linking Addis Ababa to Djibouti, has been operational since January 2018. The geothermal drill- ing currently under way should increase the supply of energy through public–private partnerships. The 4th Dji- bouti Household Survey of social indicators achieved in 2018, shows that approximately 57% of households
had access to electricity in 2017, a gain of more than 7 percentage points from 2011 (49.8%). Chronic food insecurity affected 29% of the population in 2019.
The government has implemented three major pol- icies that should boost economic momentum: The National Employment Policy 2014–24, which aims to develop the small and medium enterprises sub- sector, the Education Action Plan 2017–19, and the National Agricultural and Food Security Investment Plan 2016–20.
The fiscal deficit is projected to be 13.7% of GDP in 2020 and 13.5% of GDP in 2021. The current account deficit is projected to be 14.1% of GDP for 2020 and 15.1% of GDP for 2021. External debt is estimated at 102.9% of GDP in 2018, up slightly from 2017 (97.4% of GDP), due mainly to loans for financing large infrastruc- ture projects. According to the latest IMF debt sustain- ability analysis, the country remains exposed to a high risk of debt distress.
The country’s main challenges are vulnerability to climate change, reflected in average precipitation barely exceeding 150 millimeters a year across a large part of the country (drought and floods), low factor produc- tivity (labor and capital), little diversification of national production and exports, small domestic market (pop- ulation of less than 1 million inhabitants), a longstand- ing unchanged GDP structure, low purchasing power, unequal distribution of income, high unemployment, and low institutional and human capacities reflected in weak project implementation.
Health sector preparedness
The health system has rather weak human resources and infrastructure and is therefore limited to deal with a wide spread of the pandemic. The 2019 Global Health Security Index ranked Djibouti 175 among 195 countries globally and 46 among 54 African countries. Its score was 23.2, well below the world average of 40.2 (of 100).
Health measures. Control mechanisms at airports, ports, terminals, and border posts have been strengthened. The government established seven sites for quarantine and isolation. The Ministry of Health is increasing its human resources by mobilizing students of the faculty of medicine and general practitioners. On 1 May 2020, it launched a testing campaign targeting 45,000 people.
Support to businesses. An Emergency and Solidarity Fund was created on 31 March 2020, with an initial donation of $5.6 million from the government and other resources from development partners. A financial enve- lope of nearly $11.2 million has been allocated, in the form of micro-credits, to small businesses in tourism and catering. The government is also paying employer social security contributions of companies affected by the lockdown that continued to pay their staff. Some companies and households could benefit from a sus- pension, postponement, or cancellation of payments due to Djibouti Telecom, the National Office of Electric- ity, and the National Office of Water and Sanitation.
Social measures. Food has been distributed to the most vulnerable population in the capital city. Cash transfers have gone to vulnerable households, especially those in rural areas and the nomadic population.
Fiscal measures. Plans are to postpone the tax levy until 15 July 2020 for companies most affected by the crisis. Subsidies have been provided to public companies due to their support to businesses and households.