Djibouti, after experiencing economic growth in 2021, has encountered a slowdown in its economy since the start of 2022. This deceleration can be attributed to several factors, including the Ukraine conflict, global inflation, severe drought, and decreased demand from Ethiopia. However, there is optimism for a resurgence in growth, with expectations of a 5.3% expansion in 2023 and a further increase to 6.2% in 2024. Additionally, unlocking competition in the digital sector could contribute to a 1% boost in the national GDP by 2025, as revealed in the latest edition of the World Bank’s Djibouti Economic Monitor.
The biannual report examines Djibouti’s development trends and challenges. The autumn 2022 report, titled “Towards Sustainable Growth: Improving Fiscal Stability and Competitiveness of the Digital Sector,” estimates that real GDP growth for the entirety of 2022 will be 3.6%, down from the 4.3% recorded in 2021. However, 2022 has seen a rise in inflation due to soaring global oil and food prices, with the year-on-year rate reaching 11% by the end of June. Furthermore, efforts to mitigate the impacts of the Ukraine conflict and worsening drought have exerted pressure on the fiscal deficit. An alarming development has been the tripling of public debt service in 2022, prompting the government to temporarily suspend some of its foreign debt payments.
Boubacar-Sid Barry, the World Bank Resident Representative in Djibouti, emphasized the need for urgent action to facilitate the country’s economic recovery over the next two years. This action plan includes fast-tracking structural reforms, achieving fiscal consolidation, and implementing both private and public investment programs. The report sheds light on the current government’s initiatives, which aim to bolster Djibouti’s resilience to various shocks and create new economic opportunities. For instance, Djibouti’s strategy to diversify its port activities seeks to capture greater value in international trade. This strategy encompasses the development of a ship repair yard, a new oil terminal, and a fresh business district at the old port. Additionally, the nation is crafting a national strategy to promote a green economy, addressing the effects of climate change and generating additional income for its citizens.
A special chapter in the report examines the economic potential of opening Djibouti’s digital sector by ending the near monopoly of Djibouti Telecom. The report suggests that introducing competition in this sector could lead to more affordable and improved services, fostering the growth of new industries and strengthening Djibouti’s role as a regional hub. This development could also attract increased private investment, benefiting the country’s micro, small, and medium-sized enterprises while creating employment and entrepreneurship opportunities, particularly for its youth.
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