Sectoral Evolution and Structural Transformation in Djibouti: A Multivariate and Regularized Regression Analysis Toward Achieving <scp>SDG</scp> 9

ABSTRACT Djibouti's economic evolution over the past two decades reveals a distinct dual structure: a steadily expanding service sector that anchors the economy and a volatile industrial sector driven by episodic, foreign‐financed infrastructure projects. Motivated by the need to assess Djibouti's development trajectory and its alignment with Sustainable Development Goal 9 (industry, innovation, and infrastructure), this paper examines the sectoral evolution and structural transformation of Djibouti's economy from 1999 to 2022, focusing on understanding the interplay between its industrial and service sectors. Using a set of regularized regression models, the study uncovers the distinct roles of the service sector as a steady growth engine and the industrial sector as an episodic, project‐driven enclave economy. The analysis highlights a persistent energy bottleneck limiting industrial expansion, alongside a capital‐intensive growth model that fails to generate sufficient employment. Principal component analysis further reveals that technological progress and trade growth drive economic change but do not translate into inclusive development. The findings shed light on the urgency of investing in renewable energy infrastructure, including geothermal power, promoting small and medium enterprises linked to logistics, and reforming education and vocational training to meet labor market demands.