São Paulo – The growth of Djibouti, an Arab country in Africa, reached 7% in 2023, according to estimates by the International Monetary Fund (FMI), released on Tuesday (4) following a staff team visit to the country. The economy is expected to grow 6.5% this year and 6% in 2025, then growth is forecast to slowdown to 5.5% from 2026 to 2029.
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According to the IMF, the November 2022 peace agreement in neighboring Ethiopia bolstered the Djiboutian economy, supported by the rebound in port activity and construction. Djibouti is a Horn of Africa country bordering Eritrea, Ethiopia and Somalia.
The fund emphasized that the debt service moratorium with China provides a “window of opportunity” for the Arab country to continue to engage with creditors transparently on a strategy to fully address the unsustainable debt burden.
Reforms could help Djibouti grow further
“In this context, [IMF] Directors supported increasing the capacity of fiscal institutions to enhance tax collection and policy coherence, and called for a careful review and rationalization of tax incentives and VAT exemptions,” the fund stated, VAT meaning value-added tax.
Although supported by the peace agreement in its neighboring country, IMF says, Djibouti faces external risks, such as Ethiopia’s economic trajectory, possible increases in regional migration and refugees, and potentially increased disruptions in the Red Sea. The IMF urged the authorities to move forward with reforms, including to enhance private sector job creation, tackle informality, improve education and training, and lower telecom and energy costs.
Translated by Guilherme Miranda
