Venezuelan Economy Records Better than Expected Q2 Growth of 2.6%

Mérida, 23^rd August 2013 (Venezuelanalysis.com) – The Venezuelan economy experienced better than expected GDP growth of 2.6% for the April – June period this year, with the country’s central bank predicting the economy to continue growing throughout 2013.

The figures are good news for President Nicolas Maduro, and suggest that the government is overcoming economic problems which affected Maduro’s popularity in the run up to the presidential election in April.

“I want to congratulate the government’s economic teams. Good news came out today that has made the bitter people bitter…after the sabotage that they [opposition sectors] committed against the economy…we’ve recovered the economy slowly, but sustainably,” Maduro said yesterday.

Total growth for the first six months of 2013 compared with the same period last year is 1.6%, with the Venezuelan economy having experienced eleven quarters of sustained GDP expansion.

In the first quarter of this year the economy grew by a sluggish 0.5% [updated figure] in the context of rising inflation and scarcity levels. The country was also hit by a political shock in March, when late President Hugo Chavez passed away.

According to the Venezuelan Central Bank’s (BCV) report yesterday, the non-oil sectors of the economy which most expanded in the second quarter were finance (24.3%), communications (6.7%), water and electricity (6.0%), manufacturing (5.7%), trade (4.2%), community services (3.6%) and public services (2.9%).

Meanwhile, construction (-6%) and transport (-0.9%) contracted, as did mining by 22.2%. Non-oil related economic activity grew by 2.9% compared with oil-related growth of 1.3%.

Two economic sectors which the BCV’s second quarter report most analysed were construction and the food industry.

The shrinkage in construction was because of a slowdown in the government’s mass housing construction program, which the BCV said was “due to the culmination of a great number of works and that new projects must fulfill contractual, approval and financial disbursement processes”.

Meanwhile the food industry grew by 9.3% in the last quarter, which will be seen as a positive sign by the government in the struggle against on-going relative shortages in some basic products.

The BCV’s report states that the main reasons for the increased economic growth are “greater availability of primary resources and materials…, the increase of imports in diverse sectors, the social policies of the national government, and greater household demand for goods and services”.

The BCV, which works actively with the government on economic policy, argued that the increased availability of primary materials and greater imports were due to BCV and government efforts to “deepen the efficiency” of mechanisms granting foreign currency to Venezuelan companies.

Based on the Q2 figures, the government and BCV are now predicting total economic growth in 2013 of around 3%. “If the economy continues like this, we can assure that Venezuela will have growth of 3 percent or more in 2013,” said finance minister Nelson Merentes in a press conference yesterday.

Interpretations

Some economists were critical of the government’s positive appraisal of the economy’s performance in recent months. Jose Guerra, an economist and university professor, questioned official optimism over the state of the economy.

“What is the success? In the first half of 2013 GDP grew 1.6% and inflation 25%. In the first six months of 2012 GDP grew 5.8% and inflation 7.5%,” he tweeted, according to conservative daily El Nacional.

However, other economists have interpreted the figures as a sign that the Venezuelan economy will continue improving throughout 2013.

“This [report] shows that the economy continues growing, and that it overcame the relative wobble in the first quarter [of 2013],” said economist Jose Gregorio Piña, while speaking on state channel VTV earlier today.

“The indicators reveal to us that the [economic] situation is going to continue improving, above all in the construction sector with the boost of the Great Housing Mission”, he continued.

While BCV data shows food scarcity levels remaining relatively high over the last few months, monthly inflation has dropped from a high of 6.1% in May to 3.2% in July.

Furthermore, unemployment in June dropped to 6.9%, compared with 7.4% in June of 2012, according to the government’s National Institute of Statistics.

BCV president Eudomar Tovar argued in a press conference yesterday that the 2.6% increase in GDP from April – June created some 200,000 new jobs. “This is something very important because these are people who have an income and, as a result, generate consumption and contribute to the strengthening of the economy,” he stated.