afrol News, 16 November - Djibouti is attracting investments at a great scale, but economic growth remains slower than in the region, new data show. A boom in Ethiopian trade and use of the Djibouti port however secures sustainable growth.
The latest analysis of the Djiboutian economy, published today by the International Monetary Fund (IMF), shows a diverse picture: While Djibouti is successful attracting foreign investments and lucky to draw on the boom in neighbouring Ethiopia, economic growth in the small Horn country just will not take off.
For years, data revealed by the Djibouti Finance Ministry and the IMF, the country has experienced a lower GDP growth than sub-Saharan Africa at large and neighbouring Ethiopia in particular.
GDP growth the last five years has typically been around 5 percent annually. Taking Djibouti's population growth into consideration, this has made room for an annual GDP per capita growth of 2.5 percent each year in the same period. Social gains are therefore made, but the growth is too slow to meet poverty-fighting targets, according to the IMF.
As such, Djibouti did not feel the global financial crisis, with GDP growth in 2009 remaining stable at 5.1 percent and GDP per capita growth registered at 2.5 percent.
Economic growth is also "expected to reach about 4.5 percent in 2010," according to IMF analyst Carlo Sdralevich. The Fund however foresees a stronger growth from 2012 to 2014, which could reach 7 percent.
"The lease of military bases to strategic partners, the transit trade with Ethiopia, a booming port, and
While GDP growth in Djibouti has been lower than in Ethiopia and sub-Saharan Africa (SSA), investments in Djibouti have been higher
sustained flows of foreign direct investment have enabled Djibouti's economy to mitigate the effects of the global economic and financial crisis," according to Mr Sdralevich.
Foreign investments during the last years in particular have flowed into projects in mining, construction and energy. Also, recent investments in the Djibouti port trans-shipment business are starting to pay off.
The Djibouti port, the leading in the African Horn region, indeed remains a main motor in the Djiboutian economy. The port sees a steadily increased traffic as its main hinterland, Ethiopia, lives through a substantial economic boom. Trade volumes and values are increasing from year to year, and the IMF foresees the Ethiopian economy to keep on expanding rapidly.
Despite Djibouti's steady GDP growth, also in terms of GDP per capita, most Djiboutians however have not been able to improve their economic situation. Inflation has been growing, in particular food and energy prices, hitting the poor majority hard. The IMF talks about a "food and oil price shock on the population." Djibouti already has the second highest electricity tariffs in Africa, after Chad.
Government's social spending also has declined, according to the IMF. This came as a consequence of a need to cut spending in general and the government wage bill in particular.
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