The infrastructure program will continue to underpin growth. The rail line linking Djibouti and Addis-Ababa, nearing completion, will be operational in 2017. The Port of Doraleh (an extension to the Port of Djibouti) will open in 2017. The oil pipeline between the country and Ethiopian is also progressing, in so far as the first investment sum was decided in September 2016 by an American company. Following an agreement between China and Djibouti in January 2016, the planned Djibouti Silk Road Station, a free-trade zone financed by Chinese investments echoing the One Belt One Road project, will strengthen the trading position of Djibouti in the medium term. Other projects, a number of which are being considered, include the construction of a drinking water pipeline, together with Ethiopia, airports, a wind power farm, a solar energy facility with Germany, and a geothermal facility with China. In addition, as China is the main source of funding for recent public investment projects, the finance for certain projects is conditional on the state of the Chinese economy. The country is facing a number of major development challenges. Despite its sustained growth, a proportion of the population continues to live in extreme poverty and 22% of the active population was unemployed in 2015. Job creations chiefly benefited expatriate workers, as the local workforce lacks sufficient skills. Informal economy accounts for a significant percentage of economic activity. In addition, agriculture remains an underdeveloped sector, because of the harshness of the climate. The economy remains highly dependent on the port activity, with more than 80% of the port traffic coming from Ethiopia, which does not have a seaboard. The deterioration of the economies and the security situations within Djibouti’s leading economic partners (Yemen, Somalia and Ethiopia) represents a short-term risk for the country’s economy. In addition, an increasing number of people is fleeing the conflict in Yemen and seeking refuge in Djibouti.
Inflation is likely to rise slightly as investment spending feeds through into housing and basic services but remain limited because of the strength of the Djibouti franc, pegged to the dollar as part of a currency board arrangement.