Djibouti’s economic activity has slowed since the beginning of 2022, after the rebound observed in 2021. Fiscal pressure has increased as a result of measures to mitigate the impact of the war in Ukraine, worsening drought, and a sharp increase in debt service in 2022. Rising international energy and food prices generated high year-on-year inflation. The external current account’ deteriorated further in 2022. The banking sector has remained generally stable and sound, despite the many shocks facing the Djibouti economy. Djibouti’s economy is expected to recover gradually over the medium term. There are several risks to Djibouti’s mediumterm prospects: (i) a further deterioration in the fiscal situation resulting from a continued accumulation of public debt, a continued decline in revenues, and increased tax exemptions; (ii) potential shocks in the global transport and logistics value chains (particularly important for the activities of port-related public enterprises); (iii) the continuation or possible intensification of the Ethiopian crisis; and (iv) climatic shocks, including drought and floods. To strengthen its resilience to the multiple exogenous shocks it faces, Djibouti is implementing a strategy to diversify its port activities in order to capture more value added in international trade. This strategy includes the development of a ship repair yard, a new oil terminal and a new business district at the old port. In addition, to address the impact of climate change, Djibouti is developing a national strategy for the promotion of a green economy whose activities will help generate additional income for the population through the development of ecotourism activities in addition to their beneficial impact on climate change. In this context, the development of networks and the use of digital technology offer Djibouti significant potential for creating economic and social opportunities.
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