Djibouti

Chart 1 is a political map of Djibouti.

Djibouti is a small, lower-middle-income country at the Horn of Africa’s maritime choke point, located along the Gulf of Aden at the southern entrance to the Red Sea, bordering Eritrea, Ethiopia and Somalia. Its land area is approximately 23 180 km², with a coastline of around 370 km. This geography is the central driver of Djibouti’s development model; it is the structural foundation of Djibouti’s national development narrative. Vision Djibouti 2035 frames the country’s aspiration as becoming a regional hub (“Lighthouse of the Red Sea”) and a bridge across Africa and adjacent regions by leveraging port services, logistics and connectivity.

Djibouti is among the world’s most climate- and water-stressed settings. The 2021 World Bank’s Climate Risk Country Profile characterises the country as highly arid, with nearly 90% classified as desert and limited arable capacity. The same profile reports a historical climatology baseline (1901–2019) of a mean annual temperature of approximately 27.8°C and mean annual precipitation of approximately 244.6 mm, with high intra-annual variability and generally low rainfall outside short wet periods.

Topography and geology reinforce both risks and opportunities. The World Bank profile describes terrain comprising plateaus, plains, volcanic formations and mountain ranges reaching up to 2 000 m, with altitudes varying from 155 m below sea level at Lake Assal to over 2 000 m at Mount Moussa Ali. These physical characteristics shape settlement, transport costs, disaster risk exposure (including flash flooding in wadis and coastal hazards) and the feasibility of renewable energy development, particularly geothermal and wind.

Djibouti’s constitutional framework (Constitution of 4 September 1992) defines the state as a sovereign democratic republic, establishes Arabic and French as the official languages and identifies Djibouti City as the national capital. The constitution specifies the structure of state authority, including that executive power is exercised by the President of the Republic, who is also Head of Government. The preamble also states that Islam is the religion of the State, which matters for social policy and institutional context.

Administratively, Djibouti’s decentralisation architecture distinguishes between (i) five decentralised regional collectivities, Ali Sabieh, Dikhil, Tadjourah, Obock and Arta, and (ii) Djibouti City, which has a distinct special status. The Presidency’s official regional page states that these five regions have legal personality and financial autonomy and are administered through directly elected regional councillors, while Djibouti City has a special status under Law No. 122/AN/05/5èmeL. This law establishes “Djibouti-ville” as a territorial authority and specifies that the city comprises three communes: Ras-Dika, Boulaos and Balbala. These institutional arrangements matter for the scenario analysis that follows because many interventions (education expansion, rural electrification, social transfers, governance reforms, tariff implementation under AfCFTA) depend on multi-level implementation capacity and local service delivery.

Djibouti gained independence on 27 June 1977 following its transition from French colonial administration, and its early post-independence political development required balancing ethnopolitical cohesion and state-building in a complex regional environment. Djibouti also experienced internal conflict in the early 1990s; a key milestone in stabilisation was the 1994 Peace and National Reconciliation Accord, captured in peace agreement datasets as dated 26 December 1994, which is commonly referenced as a turning point in the conflict trajectory. In the Vision 2035 framing, peace and national unity are emphasised as prerequisites for economic transformation, reflecting the view that sustained stability is essential for investment, corridor performance and tourism, as well as for protecting the country’s role as a regional logistics hub.

The social geography of Djibouti is primarily centred around the capital region. Moreover, the country serves as a host for refugees and asylum seekers living in a fragile neighbourhood. According to the UN Refugee Agency (UNHCR) operational overview, as of 31 January 2025, Djibouti was providing international protection to 32 920 refugees and asylum seekers, which accounts for over 3% of the total population.

Chart 2 presents the Current Path of the population structure from 1990 to 2043.

Djibouti’s population structure shifted from a classic youth-heavy pyramid in 1990 toward a more working-age-dominant profile today and through 2043. The total population roughly doubled from 579 500 in 1990 to about 1 169 820 people in 2024. The Current Path indicates a further increase to almost 1.5 million people by 2043. In global comparative terms, Djibouti’s population remains a very small fraction (0.014%) of the world total, ranking around 160th globally by population size, with a median age of about 25 years.

The underlying demographic transition is visible in the changing shares of children (under 15 years), the working-age population (15-64 years) and the elderly (65+ years). The working-age population rose from about 53% in 1990 to 65.9% in 2024, and will edge up to 66.9% by 2043 under the Current Path. At the same time, the child share continued to narrow from 43.5% to 29.2%  and then to 24%. The elderly share, while small, has risen from about 3% in 1990 to about 5% in 2024, and will reach 9.3% by 2043.

Conceptually, the population pyramid is thickening through the central age bands, indicating that Djibouti is already within a potentially favourable demographic window (detailed in Chart 13) where the working-age population dominates the age structure. The fiscal implications of Chart 2 follow directly from the shifting composition of dependency. The falling child share can gradually reduce cohort pressure on primary education and child health systems, enabling a rebalancing from access expansion toward quality and completion, provided policy and financing keep pace. But by 2043, the rising 65+ share (9.3% under the Current Path) will imply that Djibouti must also plan early for higher demand for chronic disease care and support for older adults.

Fertility decline is the primary driver of this structural shift. Djibouti’s total fertility rate fell from about 6 births per woman in 1990 to roughly 2.6 in 2024. The Current Path depicts a further decrease to 2 births per woman by 2043. This trajectory aligns with the standard dynamics of the demographic transition, as fertility approaches the replacement level of approximately 2.1 births per woman. At replacement level, each generation effectively replaces itself in the absence of migration. As Djibouti’s fertility rate will reach 2 births per woman by the early 2040s, population growth is therefore expected to gradually slow.

The dependency ratio summarises how these moving parts affect the economic balance between potential producers and dependants. The dependency ratio declined from 0.88 in 1990 to 0.52 in 2024, and will decline to 0.5 by 2043 under the Current Path. A dependency ratio close to 0.50 is generally considered favourable at the macroeconomic level, but this is true only if labour markets can effectively absorb the working-age population. Essentially, a ratio of about 50 dependants per 100 working-age individuals indicates a significant potential productive base relative to the non-working-age population.

However, it is critical to distinguish age dependency from economic dependency. The International Labour Organisation (ILO) and Worldometer explicitly caution that dependency ratios do not account for labour force participation and unemployment; some people counted as “working-age” may not be employed, while some “dependants” may be working.  This distinction is central to interpreting economic implications under Djibouti’s Current Path.

Chart 3 presents a population distribution map for 2024.

Djibouti’s population distribution is characterised by extreme spatial concentration in and around Djibouti City and the coastal corridor. This pattern reflects both the country’s geographic constraints and a political economy centred on port and logistics activities. In 2024, Djibouti’s population density was approximately 50 people per square kilometre, based on a total land area of 23 180 square kilometres. Under the Current Path, density will increase to about 63 people per square kilometre by 2043.

As indicated in the introduction section, Djibouti’s social geography is highly urbanised. In 2025, Djibouti City accounted for more than 62% of the national population, followed by Ali Sabieh (7.5%), Tadjoura (5.4%) and Dikhil (4.7%). This pattern of concentration is consistent with broader urbanisation trends. According to the World Bank’s climate risk profile, around 78% of Djibouti’s population was already living in urban areas in 2019, and the urban share is forecast to increase further to approximately 85% by 2050.

Djibouti’s urban primacy has economic benefits and costs. On the upside, a dominant capital region can generate strong agglomeration economies: concentrated labour pools, denser consumer markets, lower per-capita cost of some infrastructure networks (for example, electricity distribution in dense neighbourhoods) and faster diffusion of services and innovation. This logic is consistent with Vision 2035, which explicitly frames the country’s objective as positioning itself as a hub for the regional and continental economy. The World Bank’s climate profile further highlights that the port complex is the principal economic driver, linking the spatial concentration of people and jobs to port-adjacent economic activity.

On the cost side, this same concentration amplifies the challenge of urban services keeping pace with urban growth. With the population rising to roughly 1.5 million by 2043, the demand surge is not abstract; it translates into higher requirements for housing, water supply, sanitation, electricity connections, urban mobility and broadband capacity, especially in dense and often informal peripheral settlements. Djibouti is among the world's most water-scarce countries. It faces compounding climate risks, including drought, heat waves, floods, earthquakes and sea-level rise, which raise the cost and complexity of servicing dense coastal populations. When land-use planning and drainage infrastructure lag, dense urbanisation can turn climate shocks into repeated economic losses through port disruption, damaged housing and roads and heightened public health risks. In effect, the spatial pattern intensifies the need for urban resilience investments, including flood control, coastal defences, heat mitigation and reliable water systems.

Spatial concentration also carries a distributional dimension. The Strategy of Accelerated Growth and Promotion of Employment (SCAPE) identifies the need for more balanced territorial development. It explicitly includes an axis on “poles of both regional development and sustainable development,” while also aiming to reduce social disparities and guarantee access to basic services. In a country where the capital concentrates most people and formal economic activity, peripheral regions risk being trapped in a low-access equilibrium characterised by weaker service delivery, higher transport costs, fewer formal jobs and greater vulnerability to shocks. This is not only a rural–urban issue but also a corridor dynamic, given Djibouti’s dependence on port and transit activities, particularly those linked to Ethiopia.

A further spatial dimension shaping Djibouti’s development is the distribution of displaced populations and refugee hosting, which extends beyond the capital into peripheral regions. According to UNHCR, Djibouti hosts approximately 32 000 forcibly displaced people, of whom around 85% reside in refugee settlements, with the remainder living in urban areas, including Djibouti City. These settlements are primarily located in border regions, Holl Holl and Ali Addeh in the Ali Sabieh region, and Markazi in the Obock prefecture, highlighting a distinct geography of displacement that places additional pressure on already underserved areas.

Refugee-hosting regions are not only sites of humanitarian response but also emerging nodes of service delivery and infrastructure demand. Operational updates consistently highlight the need to expand access to water, energy, transport and social services in settlements such as Ali Addeh and Holl Holl, underscoring persistent infrastructure gaps in peripheral areas.

The above trends suggest that regional development strategies should go beyond fostering secondary economic hubs to explicitly incorporate refugee-hosting areas into national planning frameworks. Investments in these regions can serve dual objectives: addressing humanitarian needs while strengthening local economies, improving social cohesion and reducing spatial inequalities. Integrating refugee populations into local service systems and labour markets, where feasible, can also support more inclusive and resilient growth, particularly in a country where geographic concentration and resource constraints already shape development outcomes.

Chart 4 presents the urban and rural population in the Current Path, from 1990 to 2043.

Djibouti is already one of Africa’s most urbanised countries. Urban share rose rapidly between 1960 and 1983 (from 50.4% to 74.5%) and continued upward to 76% in 1990. Since then, the pace of change has slowed. The urban share reached 79% in 2024 and will increase modestly to 80.5% by 2043 under the Current Path. The Current Path is broadly consistent with the World Bank’s Climate Risk Country Profile Report forecast of an 85% urban rate by 2050, up from 78% in 2019. This flattening of the urbanisation trend is typical as a country approaches saturation, a point at which urban shares can still rise, but the dominant dynamic shifts to absolute urban population growth rather than sharp shifts in the urban–rural balance.

In absolute terms, the Current Path implies a large increase in the number of urban residents over the next two decades, even though the urban share changes only marginally. Djibouti’s urban population rose from roughly 440 200 in 1990 to about 920 690 in 2024, and will reach about 1.18 million by 2043. The rural population also grew in absolute terms, from roughly 139 300 to about 249 130 and around 285 930 in the same period, even as the rural share declined. The key planning implication is that rural service demand does not disappear; it remains material and grows, while the urban service burden grows faster.

The economic implications of Chart 4 hinge on the interaction between urban primacy, infrastructure capacity and labour-market absorption. Djibouti’s economy is anchored in the capital’s port–logistics complex; the World Bank profile describes the complex as the country’s economic driver, which explains why people and jobs concentrate in Djibouti-Ville and its peri-urban communes. High urban concentration can generate agglomeration economies, dense labour markets, proximity to customers and services, and lower per-capita costs for some network infrastructure (electricity distribution, broadband rollout) when density is high. Under the Current Path, this can support productivity in tradable services (logistics administration, transport services, ICT-enabled activities) if the business environment and human capital allow firms to scale.

At the same time, the costs of high urbanisation are visible: housing deficits, congestion and undersupplied basic services can push a large share of the population into informal settlements and vulnerable living conditions. Vision 2035 explicitly acknowledges that rapid urbanisation (especially between 1977 and 2010) contributed to the “rapid development of precarious districts” driven by rural exodus and commits to a policy for “cities without shantytowns,” including economic housing and sanitation of the built environment. This is not merely aspirational; Djibouti’s Integrated Slum Upgrading Project (launched in 2018) aims to improve living conditions in deprived urban areas of Djibouti City and to strengthen institutional capacity for the government’s Zero Slum Program (Programme Zéro Bidonville), explicitly targeting vulnerable groups, including refugees and displaced populations. Development partners also document acute service gaps in fast-growing peri-urban areas. For instance, AFD notes that Djibouti City hosts a very large share of the national population and that rapid urbanisation contributed to the explosive growth of Balbala, with water and sanitation networks described as “almost non-existent” in parts of the district.

Labour-market dynamics amplify these urban pressures. As Chart 2 shows, Djibouti’s working-age population increases sharply in absolute terms under the Current Path; Chart 4 suggests much of this additional labour supply will continue to concentrate in urban areas. If labour demand in higher-productivity sectors fails to expand, the likely outcomes include higher unemployment and informality. This risk is already visible: the World Bank’s modelled ILO estimates place total unemployment at 26% in 2025 for Djibouti.  In such a context, high urbanisation can magnify social and fiscal strain (pressure for public employment, informal coping strategies) unless reforms accelerate private-sector job creation and skills development in line with national planning goals.

Urbanisation also intersects with displacement geography. As indicated in the previous section, UNHCR reports that 85% of the refugees hosted in Djibouti reside in refugee villages such as Ali Addeh, Holl-Holl and Markazi. At the same time, the remainder live in urban areas like Djibouti City. This means that even under a highly urbanised national profile, substantial service delivery needs exist in non-urban or peri-urban settings (camps and host communities), while urban systems must also plan for a share of refugees and asylum seekers integrated into city neighbourhoods. The urbanisation story is thus best understood as a two-track service challenge: scaling urban systems in the capital while ensuring infrastructure and basic services in refugee-hosting and rural areas keep pace with absolute population growth.

Finally, Djibouti’s environmental and spatial constraints intensify the stakes of urban planning. The World Bank climate profile characterises the country as highly arid, with most land classified as desert, resource scarce and vulnerable to hazards that can be exacerbated by water scarcity and weak land-use planning. For a predominantly coastal, capital-focused settlement pattern, this raises the premium on climate-resilient infrastructure: reliable water production and distribution, flood management during extreme rainfall, heat mitigation and coastal risk management (all essential for protecting households, ports and critical logistics infrastructure).

Chart 5 presents GDP in market exchange rates (MER) and growth rate in the Current Path, from 1990 to 2043.

Djibouti’s GDP (MER) expanded from US$1.47 billion in 1990 to US$4.25 billion in 2024, reflecting an average annual growth rate of 3.3%. Despite this growth, the country remained relatively small in terms of GDP, ranking 164th out of 193 countries in 2024. Looking ahead, GDP will reach approximately US$13.13 billion by 2043 under the Current Path, implying a significantly faster average annual growth rate of 6.1% over the 2025–2043 period. Overall, Djibouti’s growth trajectory since 1990 underscores its transformation into a capital-intensive, services-driven economy anchored in logistics and regional connectivity.

The historical pattern of GDP growth from 1990 to 2024 is consistent with the dominant narrative in official diagnostics. Djibouti’s growth has been strongly shaped by large-scale investment in port and transport infrastructure, conversion of its strategic geography into service activity, and renewed corridor linkages to Ethiopia, often financed by a mix of external borrowing and partner-supported investment. The Government’s National Development Plan 2020–2024 (Djibouti ICI) explicitly notes that the economy’s performance improved since 2000, with growth around 5–7% per year, especially starting 2010, and it attributes recent performance in part to the implementation of SCAPE (2015–2019) and the associated rollout of state-of-the-art infrastructure such as the Djibouti–Addis Ababa railway, ports and a Free Zone. This investment-led pattern is corroborated by the World Bank’s Systematic Country Diagnostic (SCD), which observes that Djibouti achieved “impressive growth,” averaging 8% in 2013–2016, driven by public and private investments in port and transport infrastructure, while warning that this inward-investment strategy also triggered large public borrowing and debt-financed capital accumulation with sustainability concerns.

Two implications from these primary sources are central to interpreting the 1990–2024 period. First, the growth model has been services-heavy and capital-intensive. The World Bank SCD notes that the recent investment wave has generated a predominantly capital-intensive, services-based economy, with services accounting for close to 80% of GDP, and that growth has been limited in its inclusiveness, with high unemployment and persistent poverty. Second, macroeconomic vulnerability and fiscal space constraints have been recurring issues. The World Bank SCD documents the rapid rise in public and publicly guaranteed external debt during the investment boom and emphasises Djibouti’s exposure to external shocks given its dependence on Ethiopia-linked port activities; it notes that Ethiopia’s trade accounts for more than 80% of Djibouti’s port activities and that any adverse shock or strategic reorientation could jeopardise Djibouti’s ability to service its debt and sustain growth. These constraints matter because GDP growth, even when strong, does not automatically translate into broad-based jobs and incomes unless complementary reforms raise productivity, lower input costs (notably electricity) and improve the business environment.

The 2025–2043 acceleration to an average 6.1% annual GDP (MER) growth under the Current Path will therefore be a meaningful shift. It implies that the economy will sustain a growth pace close to doubling in size about every 12 years (rule-of-72 logic), which is much faster than the 1990–2024 pace (doubling roughly every 22 years). Interpreting this forecast requires linking it to the country’s stated policy direction and to the kinds of drivers emphasised in IMF and World Bank diagnostics. Djibouti’s long-term strategy explicitly targets high growth. Precisely, Vision 2035 sets an objective to raise average real GDP growth to 8–10% per year over 2013–2035, with growth expected to be enabled by increased port-related services and expansion of transport, commerce and industry, alongside diversification into sectors such as logistics, ICT, finance, tourism, fisheries and manufacturing.

Meanwhile, the Government’s SCAPE framework sets goals that demonstrate the same logic, accelerating growth, modernising the economy, increasing the role of the private sector, promoting employment and reducing social and territorial disparities. Read against these targets, the Current Path forecast of 6.1% average GDP (MER) growth per annum will be below the Vision 2035 target. However, it represents a robust acceleration in the medium- to long-run relative to the past three decades.

From an economic perspective, the IMF 2025 Article IV helps explain the types of drivers that can plausibly support such an acceleration, as well as the conditions required for sustainability. The report notes that Djibouti’s investment-focused strategy has propelled average growth of about 6% over the past decade, and notes that 2024 growth was about 6.5%, driven by robust transhipment amid Red Sea maritime disruptions, showing how Djibouti’s hub role can translate geopolitical shocks into short-run trade and service gains. At the same time, it emphasises that high public investment and rising debt service have constrained fiscal space and calls for reforms to boost private investment, diversify the economy and create jobs, highlighting actions such as leveling the playing field between firms under special and general regimes, lowering electricity costs, improving small and medium enterprises (SMEs) financing and strengthening education and job training (aligned with the national Vision 2035 strategy).

The same diagnostics also clarify the downside risks. Debt sustainability and corridor dependence are structural constraints, not marginal issues. The World Bank SCD explicitly frames debt-financed growth as raising sustainability concerns and highlights the vulnerability created by reliance on Ethiopia-linked port activity and exposure to shocks (including adverse climate events) that can reduce fiscal space and undermine growth. In practical terms, this means that the Current Path trajectory to 2043 should be interpreted as achievable only if (i) corridor and transshipment services remain strong, (ii) Djibouti progressively broadens its service export base and reduces input costs (notably power and ICT costs, which the SCD and IMF treat as competitiveness constraints) and (iii) fiscal consolidation and improved public investment efficiency prevent debt service from crowding out human capital and resilience investment.  Climate risk is also a material macro risk driver for Djibouti, especially given water scarcity and exposure of critical infrastructure to extreme heat and episodic flooding, risks that can raise operating costs and disrupt transport and logistics activity. 

Chart 6 presents the size of the informal economy as a percentage of GDP and percentage of total labour (non-agriculture), from 2022 to 2043. The data in our modelling are largely estimates and therefore may differ from other sources.

Djibouti’s Current Path suggests a gradual but meaningful reduction in informality over the next two decades. Informality will already be lower than the African lower-middle-income (LMIC) average and will widen that gap by 2043. The informal economy's share of GDP will decline from 22.4% in 2024 to roughly 18% in 2043. Over the same period, the informal share of the non-agricultural labour force will decline from 36.6% to 28.2%. By comparison, the African LMIC average will decline from 30.3% to 26.3% of GDP and from 57% to 53% of the non-agricultural labour force. These trajectories imply that Djibouti’s Current Path will reduce informality at least as fast as the LMIC average in GDP terms, and substantially faster in labour-market terms, moving from one-third informal toward about one-quarter informal non-agricultural employment by 2043.

Before 2024, Djibouti’s informality is best understood as a structural feature of a services-led, urban economy in which highly capital-intensive logistics and port activity coexist with a large base of low-productivity urban services and trade. The World Bank’s SCD characterises Djibouti’s services dominance and notes that, outside the public sector, “most workers are engaged in low-value informal wholesale and retail trade,” and that a large share of the working-age population is unemployed, informally employed or out of the labour force. This diagnosis aligns with the classic informality dualism: a narrow modern sector (ports/State Owned Enterprises (SOEs)/public sector and some formal services) alongside a broad set of microenterprises and casual work in trade, transport, personal services and construction. Informality is therefore both a livelihood strategy and a sign of limited economic transformation, especially when it reflects survivalist self-employment rather than dynamic entrepreneurship.

Measurement and definition matter when interpreting any informality trajectory. The ILO distinguishes between the informal sector (enterprise-based) and informal employment (job-based) and provides the international statistical guidance used by many countries and datasets. The World Bank also emphasises that informality is measured using multiple approaches and has compiled a multi-method Informal Economy Database, reflecting how different estimation methods can yield different levels and trends. For this report, the critical interpretive task is not to claim a single true informal share but to explain what a declining trajectory implies for productivity, inclusion and fiscal space.

The Current Path decline in informality is consistent with Djibouti’s long-run policy intent to shift from a state-led, capital-accumulation model toward a more competitive, private-sector-driven economy with higher employment intensity. The Vision 2035 framework explicitly defines a pillar of “a diversified and competitive economy with the private sector as the engine,” alongside governance and human capital pillars that are essential for formal, productive job creation. SCAPE (2015–2019), positioned as a principal operational instrument of Vision 2035, targets large-scale job creation and emphasises private-sector-led economic growth, human capital development, strengthened governance and regional development poles. In this policy context, falling informality in the Current Path can be interpreted as the model’s assumption that a larger share of firms and jobs will become registered and regulated over time, particularly as infrastructure will improve, the business environment will reform, and formal services and value-adding activities will expand around the ports, free zones and corridor economy.

Economically, the payoff from reducing informality is substantial. Lower informality generally implies higher productivity (through better access to finance, technology adoption and scale), stronger worker protections and expanded participation in formal systems. The ILO frames transitions to formality as a core development challenge and highlights that policy packages for transition support sustainable development (SDG) progress and decent work. For the state, formalisation broadens the tax base and strengthens the contributory base for social protection, enabling more sustainable financing of service delivery and public investment. The IMF’s 2025 Article IV stresses that revenues are limited relative to spending needs and identifies priorities, including standardising tax regimes to broaden the tax base, narrowing exemptions and pursuing reforms that foster private-sector development and formal job creation, alongside energy-sector reforms and human capital investment. These recommendations are consistent with the Current Path, in which informality will decline as fiscal institutions improve, firms’ incentives to formalise strengthen, and the regulatory burden becomes more predictable.

Nonetheless, the persistence of informality, 18% of GDP and 28% of non-agricultural employment by 2043 under the Current Path, signals that structural constraints will remain. Djibouti’s corridor-dependent model is exposed to regional disruptions and geopolitical shocks that can move workers into informal coping strategies. Climate and water stress can also suppress productivity and raise the cost of formal operations, especially for small firms, reinforcing informality in low-margin activities. The Current Path improvement is therefore best read as gradual progress, not automatic transformation. To realise the forecast reductions, Djibouti must expand formal private-sector job creation faster than population growth and ensure that formalisation is not simply enforcement-driven but incentive-compatible (cheaper compliance, better services, better access to finance).

Chart 7 presents GDP per capita in the Current Path, from 1990 to 2043, compared with the average for the African income group.

Djibouti’s GDP per capita trajectory reflects three distinct phases: a sharp contraction in the 1990s, a strong recovery after 2000, and a forecast acceleration after 2024, with the country surpassing the African LMIC average around 2030/31. GDP per capita declined from about US$4 820 in 1990 to US$3 310 in 2000 before rising steadily to approximately US$6 840 in 2024. This recovery aligns with evidence from the World Bank’s SCD, which shows that average per capita GDP growth shifted from −4% in 1991–1999 to 2.6% during 2000–2014 and accelerated further to about 5.8% between 2015 and 2017, reflecting a broader structural turnaround after 2000. Under the Current Path, GDP per capita will nearly double to approximately US$12 220 by 2043, roughly US$2 600 above the African LMIC average forecast. However, the country is unlikely to achieve its Vision 2035 target of tripling GDP per capita by 2035.

The historical drivers of Djibouti’s post-2000 per-capita recovery are closely linked to services- and infrastructure-led growth stemming from its strategic location. The World Bank SCD notes that Djibouti's stable domestic political environment enabled it to leverage its strategic position to attract investors and highlights major investments, including port development and the electric railway connection to Ethiopia. As indicated in Chart 5, these investments helped fuel a predominantly capital-intensive, services-based economy.  The same diagnostic emphasises that Ethiopia’s trade accounts for more than 80% of Djibouti’s port activities, clarifying both the scale of the opportunity and the vulnerability embedded in the corridor model.  This structure helps explain why per-capita growth can be strong during periods of corridor expansion and transhipment booms, while also being exposed to external shocks and strategic competition from alternative routes. 

Those vulnerabilities are central to interpreting the forecast period under the Current Path. The IMF’s 2025 Article IV notes that Djibouti’s “investment-focused strategy” has yielded average growth of about 6% over the past decade, and states that growth remained strong at about 6.5% in 2024, driven by “robust transhipment amid Red Sea maritime disruptions.” These dynamics, Djibouti capturing logistics and transhipment rents from regional disruptions, can temporarily lift GDP and, depending on inflation and population growth, can support higher GDP per capita. However, the report simultaneously warns that substantial public investment, declining revenues and rising debt service have constrained fiscal space and increased pressure on debt sustainability. The World Bank SCD echoes this risk, arguing that capital accumulation has been increasingly debt-financed and that debt service can constrain fiscal space and limit necessary spending in social sectors.  

In short, the Current Path’s strong per-capita forecast to 2043 is consistent with ongoing expansion of services and corridor activity. Still, it is contingent on maintaining debt sustainability, strengthening institutions and improving the inclusiveness of growth.

Chart 8 presents the rate and number of extremely poor people in the Current Path from 2022 to 2043.

In June 2025, the World Bank updated its poverty lines to 2021 PPP terms, now using US$3.00 per person for extreme poverty, US$4.20 for lower-middle-income countries (LMICs) such as Djibouti, and US$8.30 for upper-middle-income countries (UMICs).

Djibouti’s poverty reduction story before 2022 is best described as growth with weak inclusiveness, shaped by a services-led, infrastructure-heavy development model that generated sizable output gains but did not consistently translate into low poverty and broad employment. The World Bank’s SCD emphasises that, despite strong growth during the 2013–2016 investment boom, “growth has not been inclusive,” and notes that a 2017 national household survey found that 20.8% of the population lived in extreme poverty. At the same time, the extreme poverty rate measured at the older World Bank’s US$1.90 line stood at 22.5%, worse than the average poverty rate of 16.4% for LMICs. The same SCD links persistent poverty to structural constraints: capital-intensive growth dominated by capital accumulation with limited labour contribution, high unemployment and informality and a narrow base of private formal job creation. This aligns with Djibouti’s own planning narrative in SCAPE (2015–2019), which frames accelerated growth as necessary but explicitly pairs it with job creation, improved access to basic services, and a commitment to reducing poverty as part of the Vision 2035 trajectory.

Recent World Bank macro and poverty monitoring indicates that poverty has been declining but remains widespread. Precisely, the Djibouti Macro Poverty Outlook reports that the share living below US$3.00 per day fell from 25.4% to 20% between 2017 and 2024, while the US$4.20 per day poverty rate dropped from 43.7% to 35.4% over the same period, with further decline forecasted through 2027. The Current Path, likewise, indicates that the downward momentum in poverty will continue and accelerate. At the US$3.00 line, extreme poverty will drop to 3.1% (45 440 people) by 2043. At the US$4.20 line, the Current Path shows poverty declining to roughly 9% (125 120 people) at the same time, substantially outperforming the Africa LMIC average and placing Djibouti within the targets of its National Development Plan (NDP) 2020–2024 (Djibouti ICI) to cut poverty by 28% in 2025. The headcount will fall by approximately 171 040 people and 272 630 people between 2004 and 2043, respectively.

This scale of poverty reduction (both at US$3.00 and US$4.20 lines) is consistent with an economy that continues expanding in high-value services (ports, logistics) while gradually improving access to basic services and human capital, drivers emphasised in official strategies (SCAPE/Vision 2035) and in partner diagnostics as necessary for inclusive outcomes. The IMF’s 2025 Article IV similarly acknowledges that Djibouti’s investment-focused strategy has produced robust growth, but stresses that rising debt service and constrained fiscal space increase the need for reforms that support private investment, job creation and sustained human capital spending. In poverty terms, the Current Path’s sharp decline at US$4.20 implies that growth is assumed to translate more effectively into household incomes than in the pre-2022 period, through some combination of (a) expanding employment and earnings in services linked to ports and logistics and ancillary urban services, (b) reduced informality and improved productivity that raise earnings per worker and (c) stronger social protection and service delivery that prevents households from falling into poverty during shocks.

The main risks to this poverty trajectory mirror Djibouti’s structural vulnerabilities. First, corridor dependence and regional instability can rapidly affect service revenues and employment. Second, climate and water stress can raise food and living costs, especially in dense urban areas, slowing poverty reduction or reversing gains during shocks. Third, macro-fiscal constraints can limit the state’s capacity to expand targeted transfers and human capital spending at the pace implied by these forecasts.

Chart 9 depicts the National Development Plan (NDP).

Djibouti’s national planning hierarchy is anchored in Vision Djibouti 2035, a long-term national vision intended to guide development toward “a desired future” by 2035. Vision 2035 is organised around five pillars. (1) Peace and National Unity, (2) Good Governance, (3) A diversified and competitive economy driven by the private sector, (4) Consolidation of Human Capital and (5) Regional Integration, explicitly linking national cohesion, institutional performance and economic transformation to inclusive development and international integration. Implementation is designed through five-year planning cycles: the Government describes SCAPE (2015–2019) as the first operational version of Vision 2035, implemented in these five-year cycles. SCAPE and Vision 2035 define a high-ambition development trajectory, tripling per capita income, creating more than 200 000 jobs, reducing unemployment to roughly 10% by 2035, reducing absolute poverty by more than one-third and achieving universal access to energy, water and basic services, providing a clear target framework for the Current Path and scenario interpretation in the rest of this report.

The second major operational plan is the National Development Plan (NDP) 2020–2024, “Djibouti ICI”, explicitly presented as consolidating SCAPE achievements and the COVID-era National Solidarity Pact, and developed within the Vision 2035 framework. Djibouti ICI is structured around three strategic axes, inclusion, connectivity and institutions, reinforced by intersecting themes including human capital development, environment and climate change and renewable energy. It also explicitly situates national planning within continental and global agendas, stating that it encompasses Djibouti’s international commitments, including the AU Agenda 2063 and the UN 2030 Agenda. Djibouti ICI includes explicit distributional targets and social objectives, for example, a stated target to reduce poverty by 28% and reduce the Gini index from 0.42 to 0.35 in 2025, while expanding access to schooling, basic health services and energy, water and sanitation. It also signals an intent to mobilise external resources (including Aid and diaspora engagement) and explicitly notes that measures to mobilise the diaspora would increase remittances.

The feasibility of this planning architecture hinges on three binding trade-offs repeatedly highlighted by development partners. First, the growth model has been investment-heavy and corridor-dependent. Second, fiscal space is constrained by the interaction of development needs and debt service. Third, environmental constraints increase delivery costs. These trade-offs shape how the report maps plan targets to the Current Path, sectoral scenarios and the Combined scenario forecasts.

Chart 29 presents GDP per capita in purchasing power parity (PPP) in the Current Path and each of the eight sectoral scenarios. The data is from 2022 with a forecast to 2043.

As illustrated in Chart 7, under the Current Path, Djibouti’s GDP per capita (PPP) will rise from US$6 840 in 2024 to approximately US$12 220 by 2043. Among the sectoral scenarios, the Governance scenario will contribute the largest gain by 2043, at about US$1 910 above the Current Path, followed closely by Financial Flows (US$1 870) and AfCFTA (US$750). These are followed by Manufacturing (US$690), Large Infrastructure and Leapfrogging (US$310), Demographics and Health (US$270), Education (US$240) and, as expected, Agriculture (US$160) will record the smallest gains.

This ordering reflects Djibouti’s underlying economic structure. The largest gains arise from scenarios that will improve the quality of institutions, efficiency of capital allocation and integration into regional and global markets, rather than those that primarily expand physical capital. Djibouti already operates an infrastructure-heavy growth model centred on ports, corridors, free economic zones and connectivity services. As highlighted in the World Bank’s SCD, the core constraint is not the absence of infrastructure, but the limited extent to which this model generates broad-based productivity gains, employment and inclusion. In this context, governance reforms will deliver the highest returns by strengthening state capability, policy implementation and the business environment. Financial Flows and AfCFTA will also perform strongly because they enhance capital utilisation and market access, helping to unlock spillovers from existing infrastructure rather than adding to the capital stock alone. This is consistent with Vision 2035, which emphasises a transition toward a more diversified, private sector-led economy.

In practical terms, the relatively modest gains under the Large Infrastructure and Leapfrogging scenario must be understood in the context of Djibouti’s financing model. While the scenario supports strategic investments, particularly in green energy, ICT and transport networks, its returns are constrained by diminishing marginal productivity of capital and a heavy reliance on external debt. Djibouti’s major infrastructure projects, such as ports, railways and water infrastructure, have been financed through borrowing from external creditors, notably China. Loans from China Exim Bank amount to roughly US$1.2 billion (around 30% of the country’s 2023 GDP), contributing to Djibouti’s classification as being in debt distress, despite restructuring efforts and temporary relief measures.

As a result, additional infrastructure investment generates mixed outcomes. While it will expand productive capacity, its impact on GDP per capita will be moderated by debt servicing obligations, fiscal constraints and the import-intensive nature of construction. Moreover, the capital-intensive and enclave characteristics of Djibouti’s infrastructure sectors limit job creation and income transmission to households. This explains why the scenario delivers only modest gains relative to the Current Path, rather than the large improvements that might be expected in less infrastructure-saturated economies.

At the lower end, the Agriculture scenario will record the smallest gains, reflecting the structural limitations of the sector in Djibouti. Agriculture contributes only marginally to GDP and employment due to severe water scarcity, limited arable land and desert climatic conditions. Even with improvements in irrigation, climate-smart agriculture and water infrastructure, the sector’s capacity to drive broad-based economic growth remains constrained. As such, gains in agriculture, while important for food security and resilience, will translate into relatively limited improvements in aggregate income compared to sectors such as governance, finance or trade.

In sum, the results highlight a clear shift in Djibouti’s growth strategy. The highest returns now lie less in expanding infrastructure further and more in maximising the efficiency and inclusiveness of existing assets. This includes strengthening governance, improving the investment climate, deepening regional integration and enhancing linkages between infrastructure, domestic firms and labour markets. At the same time, managing the public debt burden, particularly from externally financed infrastructure, remains critical to ensuring that future growth translates into sustainable and inclusive increases in living standards.

Chart 30 presents poverty in the Current Path and for each scenario, from 2022 to 2043. The user can select the number of extremely poor people or the percentage of the population.

At the US$4.20 poverty line for LMICs, poverty in Djibouti will decline significantly under the Current Path, from 34% (approximately 397 750 people) in 2024 to about 8.5% (125 120 people) by 2043. This reflects the overall growth trajectory of the economy, particularly driven by the expansion of the services and logistics sectors. However, the variation across scenarios highlights that the quality and inclusiveness of growth, not just its pace, are critical for poverty reduction.

The Governance scenario will deliver the largest poverty reduction, lowering the rate to 5.6% (around 82 750 people) by 2043, lifting an additional 42 370 people out of poverty compared to the Current Path. This strong performance reflects the central role of state capacity in translating growth into improved service delivery, better targeting of social programs and more inclusive access to economic opportunities. In Djibouti’s context, where growth has historically been capital-intensive and spatially concentrated, improvements in governance are particularly effective in bridging gaps between growth and household welfare.

The Education scenario follows, reducing poverty to 6.9% (about 101 460 people), highlighting the importance of human capital in enabling labour market participation and income mobility. This is especially relevant in Djibouti, where high unemployment and skills mismatches limit the extent to which the population benefits from growth in logistics, ICT and services. Similarly, the Manufacturing scenario (7.4%, approximately 109 170 people) performs relatively well by promoting more labour-intensive sectors, which are better suited to generating employment and broad-based income gains than the dominant capital-intensive industries.

A second tier of scenarios delivers more modest but still meaningful reductions. The Financial Flows scenario will lower poverty to 8% (approximately 117 430 people), while the Large Infrastructure and Leapfrogging scenario will reache 8.1% (around 119 060 people). The Demographics and Health scenario will reduce poverty to 8.4% (approximately 120 330 people), followed closely by the Agriculture scenario (8.4%, about 122 940 people) and the AfCFTA scenario (8.4%, approximately 123 730 people).

The relatively limited gains under these scenarios reflect structural features of Djibouti’s economy. Under the Financial Flows scenario, increased investment and remittances will support growth. Still, the poverty impact will be constrained by the enclave nature of FDI-driven sectors and limited transmission to low-income households. Similarly, while the Large Infrastructure and Leapfrogging scenario will expand productive capacity, its capital-intensive nature will generate relatively few jobs, limiting its effect on poverty reduction, consistent with Djibouti’s infrastructure-led growth model.

The Agriculture and AfCFTA scenarios will also yield modest poverty gains, albeit for different reasons. In the case of agriculture, the sector’s small economic role, due to severe water scarcity, limited arable land and a small rural population, constrains its ability to drive large-scale poverty reduction, even with productivity improvements. For AfCFTA, while trade integration boosts aggregate growth, its poverty impact depends on the country’s ability to diversify production and participate in regional value chains. In these areas, Djibouti currently faces structural constraints.

These results underscore that poverty reduction in Djibouti is most responsive to interventions that enhance inclusiveness, particularly governance reforms, human capital development and labour-intensive sectors. By contrast, strategies that primarily expand capital stock or trade volumes, without strengthening linkages to the domestic economy, deliver more limited welfare gains. To maximise poverty reduction, policy efforts should therefore focus on strengthening state capacity, improving education and skills and fostering sectors that generate broad-based employment, while ensuring that existing growth engines translate more effectively into household-level income gains.

Chart 31 presents GDP in the Current Path and in the Combined scenario from 2022 to 2043. The data is in US$ 2017 and at market exchange rates (MER).

The Combined scenario combines all eight sectoral scenarios: Governance, Demographics and Health, Education, Large Infrastructure and Leapfrogging, Agriculture, Manufacturing, AfCFTA and Financial Flows. The Combined scenario effectively represents a coordinated reform pathway rather than a simple aggregation of interventions.

As illustrated in Chart 5, Djibouti’s GDP (MER) will increase from US$4.25 billion in 2024 to approximately US$13.13 billion by 2043 under the Current Path, implying an average annual growth rate of 6.1% over the 2025–2043 period. Under the Combined scenario, GDP will expand much more rapidly, reaching about US$21.46 billion by 2043. This represents an increase of approximately US$8.33 billion above the Current Path forecast. As a result, the average annual growth rate will rise to 8.9%, about 2.8 percentage points higher than the baseline, placing Djibouti firmly within its Vision 2035 target range of 8–10% economic growth.

This acceleration is driven by strong complementarities across sectors. Governance reforms remain the primary driver, improving state capacity, policy implementation and the overall efficiency of public and private investment. This enables gains from other sectors to translate more effectively into sustained economic expansion. The next-largest contributions come from Financial Flows and Manufacturing scenarios, which will deepen capital formation and promote structural transformation towards more productive activities, and, in the case of manufacturing, more employment-generating activities.

The contribution of AfCFTA will further reinforce growth by expanding market access and strengthening regional integration, helping Djibouti move beyond its traditional re-export and logistics model. The Large Infrastructure and Leapfrogging scenario will also play an important enabling role by supporting investments in green energy and transport networks. While infrastructure alone delivers limited returns due to high debt burdens and diminishing marginal productivity, within the Combined scenario, its effectiveness will be enhanced by better governance, improved investment efficiency and stronger linkages to the domestic economy.

The contributions from the Education, Agriculture and Demographics and Health scenarios will be comparatively smaller but remain important for long-term sustainability. Education and health improvements will gradually enhance labour productivity and workforce participation, while agriculture, despite structural constraints, will support food security and resilience. However, these sectors have a more indirect and slower impact on aggregate GDP growth compared to governance, investment and trade-related interventions.

The Combined scenario underscores a key insight that sustained high growth in Djibouti requires a coordinated, multi-sectoral approach rather than isolated interventions. The largest gains emerge when institutional reforms, investment flows, trade integration and human capital development reinforce one another. This integrated pathway not only accelerates growth but also increases the likelihood that Djibouti’s infrastructure-led model evolves into a more diversified, efficient and inclusive economy.

Chart 32 presents GDP per capita in purchasing power parity (PPP) in the Current Path and the Combined scenario. The data is from 2022 with a forecast to 2043.

GDP per capita (PPP) will triple to approximately US$20 090 by 2043 under the Combined scenario, about US$7 870 higher than the Current Path forecast. This will mark a substantial improvement in average living standards, driven not only by faster economic growth but also by more efficient and inclusive transmission of gains to households. Under this scenario, Djibouti will achieve its Vision 2035 goal of tripling per capita income, albeit with a delay, reaching the target by 2043 rather than 2035.

The magnitude of this gain underscores the importance of sectoral complementarity. As observed in the individual scenarios (Chart 29), governance reforms play a central role by improving state effectiveness, policy implementation and the overall investment climate. This, in turn, will enhance the productivity of capital inflows under the Financial Flows scenario and support structural transformation through Manufacturing and AfCFTA. Together, these dynamics will increase both the scale and quality of growth, translating more effectively into higher per capita incomes.

Unlike in the individual Large Infrastructure and Leapfrogging scenario, where debt-financed investments and limited spillovers constrain per capita gains, the Combined scenario mitigates these effects. Improved governance, better fiscal management and stronger private-sector linkages will increase the returns on infrastructure investments, particularly in green energy and connectivity. This allows infrastructure to play a more enabling role rather than acting as a drag on income growth.

At the same time, investments in education, health and demographics will enhance labour productivity and workforce participation, ensuring that a more capable and healthier population supports growth. Although agriculture will contribute less directly to per capita income growth, its role in improving food security and resilience supports broader welfare gains.

The Combined scenario demonstrates that sustained improvements in living standards in Djibouti depend on aligning growth with inclusiveness and efficiency. High GDP growth alone is insufficient; what matters is the extent to which institutional quality, human capital and economic diversification allow that growth to translate into higher incomes for the population. The results, therefore, reinforce the need for a coordinated reform agenda that strengthens governance, manages public debt and maximises the returns from both infrastructure and external financial flows.

Chart 33 presents the value added by sector in the Current Path and in the Combined scenario, from 2024 to 2043. The data is in US$ 2017 and as a percentage of GDP.

Our modelling provides forecasts in six economic sectors, namely agriculture, energy, materials (including mining), manufacturing, services and ICTech.

Djibouti’s sectoral composition under the Combined scenario will shift modestly but meaningfully relative to the Current Path, indicating early signs of structural transformation. The manufacturing sector will record the largest gain, increasing its share of GDP by two percentage points above the Current Path forecast for 2043. This is followed by ICT (+0.34 percentage points) and agriculture (+0.23 percentage points). By contrast, the contribution of traditionally dominant sectors will decline: services will fall by 1.6 percentage points, while energy (-0.54) and materials (-0.39) will also register small relative declines.

This represents an important deviation from the Current Path, where services continue to expand their dominance. Under the Combined scenario, the slight rebalancing away from services suggests a partial shift from a purely services-led, corridor-based model toward a more diversified production structure. In particular, the expansion of manufacturing reflects the combined effects of improved governance, increased investment flows and deeper trade integration under AfCFTA, all of which enhance competitiveness and support the development of tradable sectors.

At the same time, it is important to emphasise that this transformation is relative rather than absolute. All sectors will expand in size by 2043, reflecting the overall acceleration in economic growth. The services sector will remain the largest and fastest-growing in absolute terms, increasing by approximately US$5.04 billion, followed by manufacturing (US$2.05 billion), materials (US$520 million), ICT (US$450 million), agriculture (US$290 million) and energy (US$40 million). This confirms that Djibouti’s growth model continues to be anchored in services, even as other sectors gain modest ground.

The increase in manufacturing’s share, alongside gains in ICT, points to emerging forward and backward linkages within the economy. Manufacturing expansion can stimulate demand for inputs (e.g. materials, logistics, energy) while also supporting downstream activities such as trade and services. Similarly, growth in ICT reflects gradual digital deepening, which can enhance productivity across sectors, particularly in logistics, trade facilitation and public administration.

However, the scale of structural change remains limited. The relatively small increase in agriculture’s share, despite targeted interventions, reinforces the sector’s structural constraints related to water scarcity and land availability. Likewise, the decline in services’ share does not imply contraction, but rather that other sectors are growing slightly faster in relative terms.

The Combined scenario suggests that diversification in Djibouti is possible but incremental. Achieving deeper structural transformation will require sustained efforts to strengthen industrial capabilities, improve competitiveness and build stronger linkages between sectors. In particular, leveraging existing infrastructure more effectively, through governance reforms, private-sector development and regional integration, will be key to shifting the economy from an enclave, services-dominated model toward a more balanced and inclusive growth path.

Chart 34 presents the size of the informal sector in the Current Path and the Combined scenario, from 2022 to 2043.

Djibouti will experience a substantially faster and deeper reduction in informality under the Combined scenario compared to the gradual decline observed under the Current Path (Chart 6). The size of the informal sector will shrink significantly in both output and labour market terms, reflecting improvements in the business environment, stronger institutions and more inclusive economic transformation. By 2043, the informal sector’s contribution to GDP will decline to 11.1%, which is about 6.9 percentage points lower than the Current Path forecast. Over the same period, the share of informal employment in the non-agricultural labour force will fall to 14.4%, approximately 13.8 percentage points below the baseline.

This represents a qualitative shift, not just an acceleration of existing trends. While the Current Path suggests gradual formalisation within a still dualistic economy, the Combined scenario points to a more fundamental transformation of the labour market structure, moving from roughly one in three workers being informal toward closer to one in seven by 2043.

The drivers of this shift are rooted in the complementarities across scenarios. Governance reforms play a central role by improving regulatory quality, reducing the cost of formalisation, and strengthening enforcement more predictably and transparently. At the same time, manufacturing expansion creates more labour-intensive and formal job opportunities, helping absorb workers currently engaged in low-productivity informal activities. Improvements in education and health enhance workforce skills and employability, enabling workers to transition into formal employment. In parallel, AfCFTA and Financial Flows scenarios support firm growth, market access and investment, which, when combined with better governance, encourage business registration and scaling.

Importantly, the Combined scenario also addresses a key limitation of the Current Path: the coexistence of a modern, capital-intensive enclave economy with a large informal services base. By strengthening linkages between sectors, particularly between infrastructure, manufacturing and services, the scenario enables more productive spillovers into the domestic economy, reducing reliance on survivalist informal activities. Unlike in the standalone infrastructure scenario, where growth will remain capital-intensive and weakly transmitted to jobs, the Combined scenario ensures that infrastructure investments are complemented by institutional reforms and private sector development, thereby enhancing their employment impact.

Lower informality is associated with higher productivity, better job quality and expanded fiscal space, as more firms and workers enter the formal system. This supports broader development objectives, including increased tax revenues, improved social protection coverage and more sustainable public service delivery. However, achieving such a transition requires that formalisation is incentive-driven rather than enforcement-led. This includes reducing compliance costs, improving access to finance, strengthening property and contract rights and ensuring that formal status provides tangible benefits to firms and workers. Given Djibouti’s structural constraints, particularly its reliance on capital-intensive sectors and exposure to external shocks, sustaining this trajectory will depend on continued progress in governance, human capital and private sector development.

Overall, the Combined scenario demonstrates that a meaningful reduction in informality in Djibouti is achievable, but only through a coordinated, multi-sectoral reform agenda that simultaneously addresses the structural drivers of informality and expands opportunities in the formal economy.

Chart 35 presents poverty in the Current Path and the Combined scenario, 2024 to 2043.

At the US$4.20 poverty line for LMICs, the poverty rate will fall to approximately 2.6% (about 37 150 people) by 2043 under the Combined scenario. This is 5.9 percentage points lower than the Current Path forecast and will translate into an additional 87 970 people lifted out of poverty by 2043. At the same time, the Gini coefficient, which measures income inequality, will decline from a stagnant level of 0.41 under the Current Path (2024–2043) to 0.37 by 2043, moving closer to the Djibouti ICI target of 0.35.

This combined reduction in poverty and inequality reflects not only faster growth, but more importantly, more inclusive growth dynamics. As shown in the individual scenarios (Chart 30), governance improvements play a central role by strengthening service delivery, improving the targeting of social programs and enhancing the overall effectiveness of public policy. At the same time, expansion in manufacturing and improved education outcomes support job creation and labour market participation, enabling a larger share of the population to benefit directly from economic growth.

The Combined scenario also addresses a key limitation observed under the Current Path: the disconnect between strong aggregate growth and limited poverty reduction, driven by Djibouti’s capital-intensive economy. By strengthening linkages between sectors, particularly through AfCFTA integration, improved investment flows and better utilisation of infrastructure, growth becomes more employment-intensive and better transmitted to household incomes. This is further reinforced by the significant reduction in informality, which improves job quality, earnings stability and access to social protection.

Importantly, the simultaneous decline in poverty and the Gini coefficient indicates that growth is not only reducing poverty but also narrowing income disparities, a critical condition for sustainable and socially stable development. This suggests a shift away from enclave-driven growth toward a more broad-based economic model.

The scale of poverty reduction implies a transition from moderate to very low poverty levels, placing Djibouti on a trajectory closer to upper-middle-income welfare outcomes. However, the remaining 2.6% (around 37 150 people) indicates that poverty is not fully eliminated and is likely to become increasingly concentrated among structurally vulnerable groups, including those in informal or low-productivity activities and in underserved regions.

Sustaining the Combined scenario trajectory will require continued focus on inclusive growth drivers. This includes strengthening governance, expanding access to quality education and health services and promoting labour-intensive sectors that generate broad-based employment. At the same time, targeted social protection and regional development policies will be essential to reach the remaining pockets of poverty and ensure that no groups are left behind.

Chart 36 compares life expectancy in the Current Path with the Combined scenario from 2022 to 2043.

Under the Current Path, life expectancy in Djibouti will rise from 69.6 years in 2024 to 75.9 years by 2043. Under the Combined scenario, it will increase further to 80.2 years, indicating a substantial improvement in survival outcomes and overall population health. This would represent a major improvement for Djibouti in comparative terms. For context, the World Bank estimates put life expectancy at birth at 73.3 years for the world in 2023, 63 years for sub-Saharan Africa, and 65 years for Eastern and Southern Africa. Djibouti’s projected 2043 outcome under the Combined scenario would therefore place it well above today’s African peer-group averages.

The improvement also aligns with the direction of major global, continental and national policy commitments. At the global level, SDG 3 aims to “ensure healthy lives and promote well-being for all at all ages,” with targets focused on reducing maternal mortality, ending preventable child deaths, combating communicable diseases and lowering premature mortality from non-communicable diseases. At the continental level, Agenda 2063 identifies “healthy and well-nourished citizens” as a core aspiration of Africa’s long-term development agenda. Nationally, Djibouti’s health policy architecture points in the same direction: the National Health Development Plan (PNDS) 2020–2024 seeks to strengthen the health system and accelerate progress toward universal health coverage, with priorities including equitable access, primary healthcare, stronger governance, sustainable financing and better health information systems. In 2023, Djibouti adopted a National Community Health Policy and a related 2024–2028 strategic plan to deepen community-level service delivery and decentralised health governance.

In Djibouti’s case, these gains would likely be driven by the combined effect of better governance, higher incomes, improved education, lower poverty, expanded infrastructure and stronger access to health and basic services. The fact that women are expected to continue living longer than men is consistent with global demographic patterns, although the projected gap remains relatively modest at under five years.

Overall, the Combined scenario suggests that Djibouti can move beyond incremental health gains and achieve a more accelerated improvement in longevity, provided that health-system reforms, universal coverage efforts and broader socio-economic transformation reinforce one another.

Chart 37 compares carbon emissions in the Current Path with the Combined scenario from 2022 to 2043. Note that the data is in million tons of carbon, not CO₂ equivalent.

Djibouti’s carbon dioxide (CO2) emissions from fossil fuels remained very low in comparative terms in 2024, at about 740 000 tons, equivalent to roughly 0.65 tons per person. This is far below the global average of 4.7 tons per person in 2024 and remains broadly in line with the averages for sub-Saharan Africa (0.7) and Eastern and Southern Africa (0.8), confirming that Djibouti’s direct contribution to global emissions is negligible.

In the Combined scenario, fossil-fuel CO2 emissions will increase to 2.31 million tons by 2043, which is about 1.14 million tons above the Current Path forecast. This increase should be interpreted primarily as a reflection of faster economic growth, industrial activity, transport demand and rising energy use, rather than a shift toward a highly carbon-intensive development model. In Djibouti’s case, even higher emissions under the Combined scenario would remain small in absolute and global terms, especially when set against the much larger emissions profiles of advanced and upper-middle-income economies. At the same time, the increase is a reminder that structural transformation, if not carefully managed, can raise fossil-fuel dependence in the short to medium term.

At the global level, the Paris Agreement and SDG 13 call for development pathways that are compatible with climate mitigation and resilience. At the continental level, Agenda 2063 emphasises environmentally sustainable and climate-resilient growth. Nationally, Djibouti has adopted an ambitious low-carbon direction: its climate and development frameworks emphasise scaling up solar, wind and geothermal energy. At the same time, Vision 2035 explicitly aspires to make Djibouti a “100% green” country in its energy supply. Djibouti’s NDC also links mitigation to the expansion of renewable energy and greener infrastructure, even while recognising that adaptation remains the more immediate national priority.

The Combined scenario, therefore, conveys a dual message. On the one hand, higher emissions are consistent with stronger economic activity and faster structural transformation. On the other hand, they reinforce the importance of decoupling growth from fossil-fuel use. For Djibouti, this means accelerating renewable energy deployment, improving energy efficiency, electrifying transport and industry where feasible, and ensuring that new infrastructure investments are aligned with the country’s green transition objectives. If these policies are implemented effectively, Djibouti can sustain higher growth while keeping emissions low by international standards and moving closer to its long-term green development ambitions.

Chart 38 compares energy demand and production in the Current Path with the Combined scenario from 2022 to 2043. Production is done in nine types, namely oil, gas, coal, hydro, nuclear, solar, wind, geothermal and other renewables. The data is converted into billion barrels of oil equivalent (BBOE) to allow for comparisons. Note that energy production could be for domestic use or for export.

Djibouti’s energy sector is undergoing a significant transition, shaped by its heavy reliance on imports and its strategic ambition to become a renewable energy hub. Under the Combined scenario, total energy production will increase from 3.21 million barrels of oil equivalent (BOE) in 2024 to 8.16 million BOE by 2043, which is about 940 000 BOE above the Current Path forecast. This expansion will be overwhelmingly driven by renewables: approximately 79% (740 000 BOE) of the additional production will come from solar energy, while about 13% (120 000 BOE) will come from wind, with the remainder (8%) contributed by oil and gas.

As a result, the share of renewable energy in total production will rise sharply from 7.3% in 2024 to 75.8% by 2043 under the Combined scenario, slightly higher than 73.3% under the Current Path. This will mark a profound structural shift in Djibouti’s energy mix, from one historically dominated by imported fossil fuels and electricity to one increasingly anchored in domestic renewable generation

Currently, Djibouti’s energy system is characterised by high import dependence. The country imports over 80% of its electricity from Ethiopia, primarily hydropower, through cross-border interconnections that have helped reduce generation costs and improve supply reliability. At the same time, Djibouti relies heavily on imported petroleum products to meet domestic energy needs, particularly for transport and thermal power generation. This dual dependence exposes the country to external price shocks and supply risks, while also contributing to fiscal and current account pressures.

In response, Djibouti has prioritised a transition toward energy self-sufficiency and renewable energy development, consistent with Vision 2035, which aspires to position the country as a 100% green energy economy. Several major projects underpin this transition. These include the Ghoubet Wind Power Plant (60 MW), the country’s first large-scale wind project; planned solar projects such as the Grand Bara solar plant (25–30 MW); and ongoing efforts to develop geothermal energy in the Lake Assal region, which holds significant baseload potential. In addition, continued expansion of electricity interconnections with Ethiopia remains central to ensuring an affordable and stable supply in the medium term.

Despite these gains in production, energy demand is projected to grow even faster, rising from 3.42 million BOE in 2024 to 13.76 million BOE by 2043 under the Combined scenario, compared to 9.77 million under the Current Path. This surge will be driven by rapid economic growth, industrialisation, urbanisation and population expansion, as well as increased electrification and digitalisation. The widening gap between domestic production and demand suggests that Djibouti will remain a net energy importer in the medium term, even as its renewable capacity expands.

From a comparative perspective, Djibouti’s transition aligns with broader continental and global trends. Under SDG 7 (Affordable and Clean Energy) and Agenda 2063, African countries are encouraged to expand renewable energy access while improving energy security. Djibouti’s strategy is particularly ambitious given its size and resource constraints, positioning it as a potential renewable energy and connectivity hub in the Horn of Africa.

The Combined scenario highlights both opportunities and challenges. The rapid expansion of renewables can reduce import dependence, lower energy costs and support decarbonisation, while also enabling growth in sectors such as manufacturing and ICT. However, the persistent gap between supply and demand underscores the need for continued investment in generation capacity, grid infrastructure and energy efficiency. Strengthening regional energy integration, scaling up private-sector participation and ensuring financially sustainable energy pricing will be critical to meeting rising demand while maintaining progress toward Djibouti’s green energy ambitions.

Chart 39: Summarises the policy recommendations for Djibouti

Djibouti’s long-term development trajectory to 2043 reflects a transition from a capital-intensive, infrastructure-driven growth model toward a more diversified and inclusive economy. Under the Current Path, the country will achieve steady economic expansion, with GDP growing at an average of 6.1% annually and poverty declining significantly. However, this trajectory will remain insufficient to meet the ambitions of Vision Djibouti 2035, particularly in terms of income growth, job creation, and inclusiveness.

The analysis shows that Djibouti’s structural constraints are not primarily related to infrastructure gaps, but rather to the efficiency, inclusiveness and connectivity of its existing economic model. Governance, financial flows and regional integration emerge as the most impactful levers for accelerating growth and improving welfare outcomes. In contrast, sectors such as agriculture and infrastructure, while important for resilience and enabling conditions, deliver comparatively smaller returns individually.

The Combined scenario demonstrates that a coordinated, multi-sectoral reform agenda can significantly alter Djibouti’s development trajectory. Under this pathway, economic growth will accelerate to nearly 9% annually, GDP per capita will triple, poverty will fall to very low levels and informality will decline substantially. At the same time, structural transformation begins to take shape, with modest but meaningful expansion in manufacturing and ICT sectors.

A central insight from the analysis is that the quality of growth matters more than its scale. Improvements in governance, human capital and private-sector development are critical for ensuring that economic expansion translates into jobs, incomes and reduced inequality. Without these complementary reforms, Djibouti risks continuing along a path of enclave-driven growth with limited spillovers to the broader population.

Looking ahead, Djibouti’s ability to achieve its long-term development objectives will depend on its capacity to strengthen institutions, manage debt sustainably, diversify its economic base and build resilience to climate and external shocks. The country’s strategic location remains a major asset, but unlocking its full potential requires shifting from a model based on infrastructure accumulation to one focused on productivity, inclusion and efficiency.