By Jack Kimball
The Red Sea state, best known as a former base of the French Foreign Legion, has become an important trade hub for the Horn of Africa due to its location on the Bab al-Mandib straits.
"If we had not been affected by the price of oil, it was planned that our growth should be more than 7 percent this year," Guelleh told Reuters in an interview.
"But we have been a victim of prices," he said, adding that growth this year would be only "modest". He did not elaborate.
Driven by demand, refinery bottlenecks and political fears, oil prices have surged to highs of more than $78 per barrel.
On Wednesday, U.S. crude <CLc1> was up 85 cents at $72.58 by 1400 GMT while London Brent <LCOc1> was also up at $71.33.
Djibouti's economy grew 4.8 percent last year, mostly due to increased activity in its port, shipping goods to neighbouring Ethiopia, Somalia and Eritrea.
The Djiboutian harbour, its main economic lifeline, has boomed in recent years due to increased investment in the port by the government, Dubai and the company Dubai Ports World.
Nearly 80 percent of goods that pass through it are destined for Ethiopia, officials say.
A bridge linking Djibouti to Yemen is also planned. Djibouti imports most of its goods and exports mostly animals and skins.
The International Monetary Fund (IMF) said the country had acquired some $1.4 billion of confirmed foreign direct investment between 2005 and 2011, mostly from Arab creditors.
Despite this, the IMF estimates that as much as 60 percent of Djibouti's 820,000 population are unemployed.
Guelleh said it would take time for investments to bear fruit: "Within the coming years, there's no reason why unemployment should not go down. We are waiting for the effectiveness of the investments."
His government would invest more heavily in the port, airport, telecommunications and a free trade zone, he added.
Source: Reuters, Aug 29, 2007