Despite the optimism declared by the government and President Ismail Omar Gueleh as 2021 closes, the release of the new budget planning document – approved last December – shows how Ethiopia’s regional crisis and pandemic have hit Djibouti’s economy hard.
The economic planning document for 2022, in fact, includes numerous increases on the fiscal side, while according to the assessments of the African Development Bank, the local economy has suffered from the weakening of global demand caused by the pandemic, which has caused a sharp slowdown in re-export activities from the Doraleh terminal, resulting in a slowdown in real GDP growth to 1.4% in 2020, compared to 7.8% in 2019.
Although the outlook for the recovery of Djibouti’s economy is deemed encouraging by financial analysts, the external variables of the pandemic and the crisis in Ethiopia continue to weigh on the economy’s recovery, leading to significant consequences in feeding the cargo terminals of the port of Djibouti.
The estimates of the African Development Bank, net of new global and regional crises, foresee a growth in Djibouti’s real GDP of 8.1% in 2022, thereby showing concerted optimism regarding the country’s chances of recovery.
However, analysts are concerned about the new fiscal increases included by the Djibouti government in the economic planning document for 2022, which reflect the government’s fears about the ability to manage commitments for the current year, and could lead to setbacks in terms of foreign investment.
The optimism of the African Development Bank’s estimates, in fact, hinges entirely on the prospects for growth in the country’s port infrastructure volumes, as well as in intercepting additional flows in the Red Sea and Indian Ocean area, which, on the other hand, could be discouraged by the increase in certain chapters of the country’s fiscal policy.
This factor could increase the structural vulnerability of Djibouti’s economy, represented by the strong growth of public debt resulting from the huge investments in the infrastructure sector (50.2% of GDP in 2015 and 72.9% in 2020).