Gross domestic product (GDP) increased by 4.5% in 2012, mainly due to more port activity and a revival in FDI, but these two pillars of the economy are still below levels of before the 2008 world financial crisis. Overall growth should speed up until 2014 thanks to extensive investment in the port and transport sectors.
The economy remains dominated by the tertiary sector – transport, communications, commerce and tourism – which accounts for 73% of GDP and employs most of the working population. The smaller secondary sector is growing, but the primary sector remains insignificant.
Transport and related logistical services remain the backbone of the economy. Port activity has revived though transshipment operations remain small. The government launched a programme to develop the sector in 2012 by raising money to build two ports as well as road corridors. A port in Tadjourah to handle potassium exports from Ethiopia is expected to be ready by the end of 2014. A road from Tadjourah to Bahlo via Randa was completed in 2012 to carry 8 million tonnes a year of ore to the new terminal that will boost the country’s port activity by 15-20%. A bulk-carrier port at Goubet for salt from Lake Assal will open in 2013.
Telecommunications, construction and tourism continue to grow, although less than the dominant transport sector. Telecommunications is steadily expanding due to mobile phones, whose operators had 211 000 subscribers in an estimated population of 864 617 in 2011, but growth of subscriptions has slowed due to network saturation. Work begun in 2012 to allow third-generation (3G) connections will be complete in 2013 and expand network capacity to 600 000 subscribers.
Internet subscriptions showed the biggest expansion in 2012 (of about 30%) due to higher-speed lines, lower rates and extension of service to other parts of the country. Growth outside the capital of CDMA (Code Division Multiple Access) technology, which is similar to Wi-Fi but considered land-line, became popular in rural areas in 2012, and CDMA subscriptions increased some 170% between 2011 and 2012. Rapid expansion of land and mobile lines forced a switch from six- to eight-figure numbers in 2012.
Construction in 2012 continued its steady growth of recent years. More construction permit applications were made in 2011, (249 compared with 183 in 2009), while land purchase requests rose to 1 162 in 2011 (621 in 2010 and 162 in 2008). The national housing fund’s effort in 2010 to widen access to house ownership by legalising land titles greatly boosted applications. The construction boom highlighted the need to update planning frameworks in Djibouti and in the provinces and the government promised this for 2013.
Tourism also continued to grow and overnight stays increased by one-fifth in 2012, mainly with business travel connected with the foreign military bases and forces in the country, as well as with travel connected with efforts to fight piracy off the Horn of Africa. These visitors stayed in the capital despite the potentially very attractive sites elsewhere in the country.
The IMF’s ECF ended in May 2012 with the sixth and last review of the programme, which was pronounced satisfactory, with good macroeconomic stability, and structural reforms in the financial sector (notably bank supervision) and in public finance management. The government asked for a new programme after the February 2013 parliamentary elections. The IMF said it would depend on achievement of macroeconomic targets worked out at the end of the last programme.
These included reducing the government’s use of bank loans, tightening spending controls, collecting more taxes, and continuing to seek soft loans, repaying domestic debt arrears and protecting social spending, mainly by creating a safety net for poor families.
The government has launched an ambitious programme of infrastructure expansion to consolidate Djibouti’s position as a regional trading and services hub. Projects planned for 2013 and 2014 include upgrading the railway line between Ethiopia and Djibouti (feasibility surveys have been commissioned) and improving roads after a regional integration agreement signed with Ethiopia and South Sudan as part of the wider framework of the Common Market for Eastern and Southern Africa (COMESA).
Plans to prospect for oil continue, along with building a pipeline from South Sudan to Djibouti, expanding the Doraleh oil terminal and building a refinery there.
The government has also announced it will enlarge the Doraleh container terminal using its own funding, set up a new free-trade zone and build a fishing port at Damerzog.
Excerpt from African Economic Outlook 2013: Djibouti
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