Unlocking Djibouti's Growth Potential: The Road Ahead

Abstract

Djibouti recent windfall in military-related revenues and new investments in the port may have a limited impact in the rest of the economy in the absence of policy reforms. Increased poverty and unemployment is the legacy from almost two decades of slow growth, lackluster private investment, and a fast-growing unskilled labor force. Maintaining the status quo, or muddling through, would at best lead the country to grow at 3.5 percent per year over the next decade. With annual population growth averaging 2.8 percent, this economic growth will be insufficient to make a substantial dent in poverty. By contrast, sustained efforts to implement key policy reforms proposed in this report could help Djibouti achieve an average real GDP growth of 4.5 percent, reach the education Millennium Development Goal (achieving 100 percent primary completion rates by 20 15), and strengthen the confidence of private investors and donors.