DJIBOUTI, Nov 14 (Reuters) - Djibouti's economy is expected to grow by 4.5 percent in 2010, versus an estimated 5 percent last year, and inflation remains a challenge, the International Monetary Fund said.
Djibouti, a former French colony which separates Eritrea from Somalia, hosts France's largest military base in Africa and a major U.S. base. Its port is used by foreign navies patrolling busy shipping lanes off the coast of Somalia to fight piracy.
"Economic growth remained strong and should be around 4.5 percent in 2010 and promote the good conduct of fiscal and external accounts," the IMF said.
"Rental of military bases to strategic partners, the transit trade with Ethiopia and the dynamism of the port activity and sustained flows of foreign direct investment ... has allowed the Djiboutian economy to mitigate the effects of the world economic and financial crisis."
IMF said inflation arising from high food and fuel prices was still a challenge. "Inflationary pressures on the international food and energy markets will weigh on the index of consumer prices in Djibouti." (Reporting by Abdourahim Arteh; Editing by George Obulutsa and Dan Lalor)