Country Report Djibouti November 2006

Outlook for 2007-08: Inflation and exchange rates

High international oil prices, combined with higher economic growth and continued high public spending, will cause continued inflationary pressure over the forecast period, although monetary policy may help to contain much of this. In addition, although we expect that oil prices will start to ease in 2007, prices are likely to fall only gradually. As a result, we expect inflation to remain relatively high by recent standards, averaging 3% in 2007-08. The Djibouti franc is expected to remain pegged to the US dollar, at Dfr177.72:US$1, and as a result it will mirror US dollar movements against the euro in 2007-08.

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