1. Djibouti’s growth model, built around port activity, has brought high growth rates but also shown some fragilities. Djibouti is a small economy which has leveraged its location in the Horn of Africa to position itself as a port of entry for neighboring landlocked Ethiopia. This has enabled the Djiboutian economy to record growth rates averaging six percent annually between 2013 and 2019. However, this growth model has also shown some fragilities. First of all, capital-intensive growth around port activity has not created enough jobs for the local population. The last unemployment survey, conducted in 2017, estimated an ILO unemployment rate at 27.5 percent, rising to 65.1 percent for 15–34 year olds and 86.2 percent for 15–24 year olds. Secondly, the Djiboutian economy is considerably exposed to shocks on trade, as shown during the pandemic. Thirdly, insofar as Djibouti’s ports mainly serve Ethiopia (with Ethiopian trade accounting for about 95 percent of operations), the economic outlook in Djibouti is largely driven by the economic outlook in Ethiopia. This was particularly apparent during the conflict in Tigray between November 2020 and November 2022.
1. Djibouti’s concerted investments in logistics during the last decade have increased the efficiency of its port and overall growth. Located on the Horn of Africa, Djibouti enjoys a strategic position at the crossroads of Africa, the Arabian Peninsula, and Asia. The country has leveraged this position to become the main port of landlocked Ethiopia. This required significant infrastructure investments including, in 2013, a multipurpose port and a railway connecting Djibouti and Addis Ababa. As a result, growth averaged over 6 percent in 2013-2019 and ports performance increased significantly. Currently, the World Bank ranks Djibouti top amongst all container ports in SubSaharan Africa with a rise in ranking from 93 to 24 in two years. However, economic activity moderated significantly in 2020-21, following the pandemic and the conflict in Ethiopia.