Country Report Djibouti November 2009

Outlook for 2010-11

The president, Ismael Omar Guelleh, and his governing coalition movement, Union pour la majorite presidentielle (UMP), will remain firmly in power over the forecast period. The Economist Intelligence Unit expects that the constitution will be amended to allow Mr Guelleh to stand (and win) a third term in 2011. The IMF has agreed a poverty reduction and growth facility (PRGF), under which US$20m of assistance will be available between 2008 and 2011. However, government resistance to reform could lead to problems during the period. Real GDP growth is estimated to reach 6.4% in 2009 and is forecast to average 6.2% in 2010-11, reflecting the US and French military presence and the inauguration of the new port at Doraleh. The Djibouti franc will remain pegged to the US dollar at the current rate of Dfr177.72:US$1, and will move in line with the US dollar—weakening against the euro from Dfr248:€1 in 2009 to Dfr253:€1 in 2010, before strengthening slightly to Dfr248:€1 in 2011.

The political scene

Discontent is growing over plans to amend the constitution to allow Mr Guelleh to stand for a third presidential term in 2011. The government has taken steps to suppress this opposition, including arrests and dismissals. There are fears that these actions could fuel rebel insurrections, which are still continuing in the north of the country. Djibouti is continuing to urge the UN Security Council to take action to resolve its border dispute with Eritrea. Djibouti has again done badly in an influential survey of governance in Africa and performed particularly poorly in respect of its record on participation and human rights.

Economic policy

There are signs that famine conditions in Djibouti may be easing, although large numbers of urban and rural poor still face acute food insecurity. Djibouti been assessed as one of the worst countries in the world in which to do business by the World Bank.

The domestic economy

Latest data show that recovery in the port of Djibouti may be faltering as the government tries to reduce its dependence on flows to and from Ethiopia and boost its transshipment business following the opening of the giant new container terminal at Doraleh. There are signs that small-scale, niche tourism is continuing to grow in Djibouti, as the number of tourists grew by 10% in 2008.

Foreign trade and payments

USAID has granted Djibouti US$3.8m for educational and health projects, as well as for minor funding for governance improvement.

This report covers the following industry codes:
SIC Code: 47;70
NAICS Code: 48;72