This comes after a decade of negative or low growth and is attributed to fiscal adjustment aimed at improving public financing, reforms in port management and foreign investment.

Fiscal adjustment measures included downsizing the civil service, implementing a pension reform that placed the system on a much stronger financial footing, and strengthening public expenditure institutions.

[9] In the 21st century, Inflation has been kept low through fixed pegging of the Djibouti franc to the US dollar, but experienced a sharp spike in the late 2000s, when it reached values three times higher than the average of the last 20 years.

[11][12] Furthermore, reliance on diesel-generated electricity and the need to import basic necessities like food and water leave average consumers vulnerable to global price shocks.

Threats of pirates patrolling the Gulf of Aden, off the coast of Somalia, with the intentions of capturing large cargo ships, oil, and chemical tankers has created the need for larger nations such as the United States, France, and Japan to embed logistics bases or military camps from which they can defend their freight from piracy.

[15] Since 2010 China has become an important trading and military partner for Djibouti, including it in its African Road and Belt Initiative through the construction of infrastructure projects like a railway link to Ethiopia and the Doraleh port.

[14][18] Chinese influence in Djibouti, particularly through its military base and financial debt, has been criticized in recent years as being more beneficial to the stability of the current political regime than for the country as a whole.

US$ nominal) Despite not being hit as hard as other countries by the COVID-19 pandemic, Djibouti's economy suffered the effects of the global slowdown in trade and diminished traffic through the Doraleh port.

[22][9] Djibouti's economy is based on service activities connected with the country's strategic location and status as a free trade zone in the Horn of Africa.

Per capita consumption dropped an estimated 35 percent over the last seven years because of recession, civil war, and a high population growth rate.

Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.

[25] According to a financial risk assessment from 2018, the country has been suffering from increasing corruption and a decline in international governance and transparency indices, growing debt and over-reliance on Ethiopia and China for trade and FDI, respectively.

[27] Djibouti's assets include a strategic geographic location, an open trade regime, a stable currency, substantial tax breaks and other incentives.

President Ismail Omar Guellehh first elected in 1999, has named privatization, economic reform, and increased foreign investment as top priorities for his government.

[27] Conditions of the structural adjustment agreement recently signed by Djibouti and the International Monetary Fund stipulate increased privatization of parastatal and government-owned monopolies.

[31] A Santander report concluded that despite its strategic importance, FDI into Djibouti is hampered by "mediocre governance, corruption, the lack of a sound judicial framework, an unstable regional geopolitical situation, a poorly diversified economy with little resilience to outside shocks, and a fragile ecosystem prone to environmental crisis.

[33] Principal exports from the region transiting Djibouti are coffee, salt, hides, dried beans, cereals, other agricultural products, chalk, and wax.