Inflation in Venezuela Falls for Second Consecutive Month

Mérida, 12^th August 2013 (Venezuelanalysis.com) – Inflation in Venezuela decreased for the second month in a row, while food shortage levels remain almost unchanged on June’s figures.

According to a report by Venezuela’s Central Bank (BCV) last week, inflation in July was 3.2%, a decrease from 4.7% in June and a Bolivarian Revolution-era record 6.1% inflation in May.

The increase in food prices, a key driver of the country’s inflationary spike in the first half of 2013, also slowed last month. These rose by 2.4% in July, a significant drop compared to 5.8% food price inflation in June and 10% in May.

The inflationary spike began in February in the context of rising levels of food shortages and the devaluation of the Bolivar currency. Levels of food shortages and inflation peaked in April and May respectively, coinciding with the April presidential election.

Although monthly inflation has reduced since May, the annualised rate remains high, at a cumulative rate of 42.6% over the previous 12 months, compared with an annual rate of 19.4% recorded in July 2012.

Food shortage levels have remained almost unchanged since last month, rising to 19.4% compared with 19.3% in June, according to the BCV’s Scarcity Index, which measures availability of basic products in stores. This rate reflects the probability that a given food item is not available at the supermarket.

This represents a drop from the 21.3% scarcity recorded in April. However authorities want to reduce scarcity to below 14% by the end of the year, a level which officials consider “normal”, according to president of the country’s National Institute of Statistics, Elías Eljuri.

The country’s conservative opposition and some economists blame inflation and shortages on government policy, such as price controls on basic goods and delays in granting dollars to the private sector for imports and production. Currency controls have been in place since 2003 to prevent capital flight.

Meanwhile, President Nicolas Maduro accused the private sector of engaging in “economic sabotage” to undermine his government by speculating on Venezuela’s currency and hoarding goods in order to provoke scarcity.

In a recent interview with leading newspaper Últimas Notícias, BCV head Edmeé Betancourt argued that the government had taken measures to address the factors behind shortages and inflation, including working with the private sector to boost production and speeding up dollar grants to importers and producers.

“Inflation is going to continue decreasing”, she argued, while also predicting that GDP would continue growing in the next quarter. GDP grew by a modest 0.7% in Q1 of this year, Venezuela’s tenth consecutive month of GDP growth.