Mérida, November 13, 2008 (venezuelanalysis.com)– In the last few months Venezuela has been affected by the global financial crisis but still was able to sustain its economic growth. Unemployment has fallen and its international reserves have increased, whilst its inflation has also increased and its price of oil decreased.
Unemployment fell to 7.2% in September this year, which is a decrease from 8.3% in the same month last year, meaning that 427,063 people obtained work in this period, according to the Monthly Report of the Situation of the Work Force by the Venezuelan National Institute of Statistics (INE).
The study was conducted over the month of September and included the entire population apart from indigenous communities in the Amazon, those living in hotels, military barracks, prisons, or in towns of less than 10 houses.
The INE stated in a press release that 11,884,545 people were employed in September. Of the people who obtained work, 210,016 were men and 214,047 were women. 396,864 obtained work in the formal sector, so that the percentage of people employed in the formal sector overall went from 55.5% in 2007 to 56.8% in 2008.
According to the newspaper El Universal, food prices have increased by 51.4% over the last 12 months, and overall inflation in that time has been 36%, "the highest of 17 similar economies in Latin America" whose average inflation was 10.66%.
From January of this year until October, the accumulated inflation so far is 24.7%. El Universal analysts estimate that the year will finish with 30% inflation, due to end of year price increases as people go on holidays and have more money to spend.
October's inflation rate was 2.4%. The Central Bank of Venezuela attributed the higher inflation rate to the increase in prices of alcoholic and non alcoholic drinks, tobacco, food, restaurant dinning, hotel stays, and home items.
Specifically, in October, drink prices increased by 8.8%, food by 3.1% and restaurants and hotel prices increased by 3%.
Venezuela's total international reserves have increased to a total of $39.96 billion, which is a 3% increase over the previous month. Of this total, $828 million are in the Macroeconomic Stabilization Fund (FEM), which was created in 1998 as a buffer against the fluctuations of the price of oil.
Also, Venezuela says it has several tens of billions of dollars in its development fund, Fonden, which it will be able to use to bridge budget shortfalls.
The price of a barrel of Venezuelan oil closed at $52.96 last week. That is a lot lower than the year's average of $96.68, and last year's average of $64.74. However, it is higher than the 2005 average of $45.39.
The ongoing price decreases can be explained by a declining demand, due to the global financial crisis.
Yesterday, President Chávez admitted that a low oil price could end up hurting Venezuela's economy. "The price of oil has been falling as a product of the global crisis… That's the factor, that if it continues to extend itself for a period of time, could affect us, of course it would affect us," said Chávez during a campaign event.
However, an Oxford Analytica report that appears in today's International Herald Tribune states, "Despite various warnings to the contrary, the evidence does not seem to indicate that Venezuela's economy is under immediate threat from declining oil prices." The report cites Venezuela's high reserves and its conservative 2009 budget estimates.
The Minister for Planning and Development, Haiman El Troudi, said last week that unlike other countries "immersed in recession," Venezuela is achieving its aim for economic growth, of 6%.
The former minister for Finances, Rodrigo Cabezas, said that from July to September this year, various sectors have grown sustainably (such as food, textiles, and housing), which has "generated more employment and maintained a rhythm of growth." He also noted that its economic growth will be the highest in Latin America at the end of the year.
With 20 quarters in a row of growth, El Troudi was confident that Venezuela will "continue on its path of political and social development that is planned in President Hugo Chavez's socialist agenda…in the 2009 budget he is planning to continue all these policies … as well as pushing the national productive apparatus."