Private consumption is the largest contributor to GDP in Ethiopia, representing a forecast --.- of GDP in ----, yet its contribution will decline over our ---year forecast period. The contribution of fixed investment will increase over the next five years, as government pushes through key infrastructure projects, in order to improve logistic channels, agriculture and manufacturing. ...We forecast government consumption to grow by -.- on average over the next -- years. Fixed Investment: Growth in Ethiopia s economy will be driven primarily by fixed investment into the country over the next five years, with economic growth moderating in the following five years as fixed investment slows. We forecast fixed investment s share of GDP to increase by -.- percentage points to --.- in ---- and then fall back to --.- in ----. ...We forecast fixed investment s share of GDP to increase by -.- percentage points to --.- in ---- and then fall back to --.- in ----. The government s Growth and Transformation Plan aims to invest substantially in the development of physical infrastructure to improve logistics - Business Monitor International Ltd www.bmiresearch.com
...We expect monetary policy in Ethiopia to remain loose over the year ahead as the National Bank of Ethiopia increases money available for lending to the government. We do not expect the National Bank of Ethiopia to devalue the currency given the risk associated with pass- through effects to inflation. ...This is highlighted by headline inflation rising to --.- in January, with food prices rising --.- and non-food prices rising -.- . We believe this signals that monetary policy in Ethiopia is not well coordinated, as the NBE elects to increase money supply in a high inflationary environment but is reluctant to devalue the currency in fear of a strong pass-through to inflation. Although food price inflation has been a major determinant of inflationary pressure in the country over the past few months, we expect the non-food component to rise in the following two years. ...This trend has been driven by the government s need for funds, as fixed investment has grown by --.- between ---- and ----. We expect high levels of fixed investment to ensure that the NBE -- Business Monitor International Ltd www.bmiresearch.com
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