Coastal Region drives Growth Outlook for 2015

06 Apr 2015
Port of Djibouti

Growth in neighbouring countries without access to the sea (Ethiopia and South Sudan) and growth resulting from port-related activities in Djibouti will give vitality to Djibouti’s economic growth in 2015. There are a considerable number of transport links being developed between Djibouti and the capitals of its neighbours to facilitate the transiting of their products through Djibouti’s ports. In this way, 80% of Ethiopian exports are shipped through Djibouti. Public investment is thus helping boost growth. Foreign investors are also playing a significant role in development within Djibouti. One example is the highway that is going to be built between eastern Ethiopia and Djibouti.

This follows on from two other projects that were started in 2014: a rail link and an electricity line. The degree of interdependence between the two countries has been further increased with Djibouti importing electricity from Ethiopian hydroelectric facilities. Economic growth will also be lifted by the expansion of the country’s leading container port, in Doraleh. The two largest Chinese civil engineering companies, China State Construction Engineering Corporation (CSCEC) and China Civil Engineering Construction Corporation (CCECC), have invested a total of US$ 580m in the second construction phase for this port. This second phase will enable the addition of seven quays that can handle cargos of 100,000 tonnes. The agreement also includes the development of the port of Damerjog (south of the capital), enabling the export of live animals (up to 150,000).

Two other projects are also scheduled to start in 2015: A liquefied gas terminal and another for crude oil. In addition, there are plans for expanding the fish farming sector, financed in particular by the United Arab Emirates. The aim is to gradually increase the annual production of fish from 2,000 to 30,000 tonnes.

However there are still serious structural bottlenecks in the Djibouti economy. Most electricity is generated in power stations fired by imported oil. Despite the falling cost of oil in 2014, the cost of its energy supplies will remain high and power cuts will continue on a frequent basis. In addition, despite the country’s strong growth, the construction of the new infrastructure is not really helping create local jobs for what is a mostly unskilled workforce, suffering high rates of unemployment and poverty (approximately 60% of the active population are unemployed and 42% of Djiboutians live in extreme poverty).

As for prices, inflation is likely to moderate in 2015 because of lower oil prices.

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