Venezuela’s economy returns to growth as prices rise slowly
Venezuela’s economy is showing signs of recovery after five years of severe economic crisis and hyperinflation, the Venezuelan president has claimed.
Nicolas Maduro told the country’s parliament that the economy expanded by 7.6 percent in the third quarter of last year and could grow “more than 4 percent” for the full year, hailing it as “a remarkable achievement.”
“After five years of economic war, boycotts and blockades, Venezuela is back on the path to economic growth,” he said in remarks over the weekend, adding that exports were up 33 percent in 2021.
If Maduro’s numbers are accurate — economists’ estimates vary widely — it would be the first increase in gross domestic product in the oil-rich country in eight years. The economy shrank by about 75% during that period, turning one of South America’s largest economies into one of its smallest.
This socialist government decision Loosening currency controls, easing import restrictions and encouraging informal dollarization have revived wealth. Credit Suisse recently said it expects growth to reach 8.5% in 2021 and expects a further expansion of 4.5% this year.
The bank said its assessment was “mainly driven by improved oil production” as well as more dollarization, higher imports, higher tax revenues and other factors.
Other economists were less optimistic, but agreed the economy was growing again amid the worst of the coronavirus pandemic.
“Our combined growth forecast for 2021 is 2.5 percent, and we expect growth in 2022 to be between 3-5 percent,” said Tamara Herrera, chief economist at Caracas-based consultancy Síntesis Financiera.
Growth resumes with hyperinflation in economy, albeit from a very low base Venezuela Eventually it burns out.
Monthly inflation was 7.6 percent in December, the 12th straight month below the 50 percent threshold for hyperinflation widely considered by economists, according to the central bank. The bank said annual inflation was 686% last year, down from nearly 3,000% the year before.
From 2016 to 2019, the first hyperinflation lasted 28 months — the fifth longest on record, said Steve Hanke, a professor of applied economics at Johns Hopkins University. The second game of 2020 lasted nine months.
According to the Venezuelan Financial Observatory (OVF), a non-governmental organization that measures price increases, the hyperinflation started in 2017 and has not stopped, making it the third-longest on record, after the late 1980s. Nicaragua and Greece during World War II.
The speed at which prices have risen has prompted most Venezuelan businesses to switch to the dollar, which is now used for about two-thirds of transactions in the country.
Central banks also intervened to prop up the bolivar. “The key to the recent uptick in inflation is the central bank’s intervention in the foreign exchange market, which controls the exchange rate,” Credit Suisse said.
However, Peter West, an economic adviser at EM Funding in London, said even the most optimistic forecasts point to low triple-digit annual price growth in 2022, which still “constitute a prolonged period of high or skyrocketing inflation”.