2022 Index of Economic Freedom

Djibouti

OVERALL SCORE55.3
WORLD RANK120
Rule of Law

Property Rights33.1

Judicial Effectiveness28.3

Government Integrity24.5

Government Size

Tax Burden80.0

Government Spending83.3

Fiscal Health92.1

Regulatory Efficiency

Business Freedom48.6

Labor Freedom50.7

Monetary Freedom69.5

Open Markets

Trade Freedom43.2

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 1.0 million
  • GDP (PPP):
    • $5.6 billion
    • -1.0% growth
    • 5.4% 5-year compound annual growth
    • $5,096 per capita
  • Unemployment:
    • 11.6%
  • Inflation (CPI):
    • 2.9%
  • FDI Inflow:
    • $240.0 million

Djibouti’s economic freedom score is 55.3, making its economy the 120th freest in the 2022 Index. Djibouti is ranked 21st among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

Over the past five years, Djibouti’s economic growth accelerated through 2018, slowed in 2019 and 2020, and rebounded in 2021. A five-year trend of expanding economic freedom has halted. With higher scores for property rights, judicial effectiveness, fiscal health, and government spending, Djibouti has recorded an 8.6-point overall gain of economic freedom since 2017 and has climbed out of the “Repressed” category, but it is still considered “Mostly Unfree.” Monetary freedom has improved, but trade freedom and government integrity have weakened.

IMPACT OF COVID-19: As of December 1, 2021, 186 deaths had been attributed to the pandemic in Djibouti, and the government’s response to the crisis ranked 83rd among the countries included in this Index in terms of its stringency. The economy contracted by 1.0 percent in 2020.

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Background

The French Territory of the Afars and the Issas became Djibouti in 1977. President Ismael Omar Guelleh won a fifth five-year term in 2021. Djibouti is home to the only permanent U.S. military base in Africa and also hosts bases maintained by China, France, Italy, and Japan. Its services-based economy depends on commerce related to Djibouti’s strategic location at the mouth of the Red Sea, which makes its railway and deep-water port facilities key assets. In 2018, Djibouti launched Africa’s biggest free-trade zone, which will be managed by Chinese companies. Djibouti has lost a series of international arbitration rulings to a Dubai-based company in a controversy stemming from Djibouti’s 2018 nationalization of a terminal in the Port of Djibouti.

Rule of Law

Property Rights 33.1 Create a Graph using this measurement

Judicial Effectiveness 28.3 Create a Graph using this measurement

Government Integrity 24.5 Create a Graph using this measurement

Property rights are protected by law, but Djibouti ranks below regional averages for property registration and enforcement of contracts. The ineffective judiciary is subject to political manipulation and vulnerable to corruption. The presidency dominates all aspects of administration and operates in an opaque manner. Corruption, reportedly including the president and his closest family members, is rampant, and there is no accountability.

Government Size

The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Other taxes include property and excise taxes. The overall tax burden equals 21.8 percent of total domestic income. Government spending has amounted to 23.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 42.2 percent of GDP.

Regulatory Efficiency

Companies can now register online. The new Djibouti Port Community System platform offers services to businesses. The unemployment rate is high. Up to 75 percent of workers in the capital city work in the informal sector. Complex labor laws favor the employee. Wholly state-owned enterprises control telecommunications, water, and electrical distribution as well as major media outlets and the country’s ports, airport, and free zones.

Open Markets

Djibouti has no preferential trade agreements in force. The simple average tariff rate is 20.9 percent, and nontariff barriers further undermine the benefits of trade. Foreign investment is screened, and state-owned enterprises continue to be a distorting factor in the economy and long-term economic development. The underdeveloped and state-controlled financial sector limits access to credit.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius70.9-6.1
2Cabo Verde66.72.9
3Botswana64.8-2.8
4Côte d'Ivoire61.6-0.1
5Seychelles61.1-5.2
6Benin611.4
7São Tomé and Príncipe60.34.4
8Senegal602.0
9Ghana59.80.6
10Tanzania59.5-1.8
11Namibia59.2-3.4
12Madagascar58.91.2
13Burkina Faso58.31.8
14The Gambia58-0.8
15Togo57.2-0.3
16Rwanda57.1-11.2
17South Africa56.2-3.5
18Mali55.90.3
19Gabon55.8-2.3
20Mauritania55.3-0.8
21Djibouti55.3-0.9
22Niger54.9-2.4
23Nigeria54.4-4.3
24Uganda54.2-4.4
25Guinea54.2-2.3
26Malawi530.0
27Cameroon52.9-0.5
28Kenya52.6-2.3
29Angola52.6-1.6
30Sierra Leone520.3
31Eswatini51.4-3.7
32Mozambique51.3-0.3
33Comoros50.4-5.3
34Chad49.8-0.6
35Ethiopia49.6-2.1
36Zambia48.7-1.7
37Republic of Congo48.5-2.2
38Lesotho48.1-5.4
39Liberia47.9-1.3
40Democratic Republic of Congo47.6-1.4
41Equatorial Guinea47.2-2.0
42Guinea-Bissau46-8.9
43Central African Republic45.7-3.1
44Eritrea39.7-2.6
45Burundi39.4-10.5
46Zimbabwe33.1-6.4
47Sudan32-7.1
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