Caracas, May 30, 2019 (venezuelanalysis.com) – The Venezuelan Central Bank (BCV) released economic indicators on Tuesday for the first time in over three years.
The data reveals that the Venezuelan economy has contracted by 47.6 percent between 2013 and the third trimester of 2018, the last one for which there are figures. There has been no official communication justifying the new release of information.
The BCV data reveals that Venezuela’s period of extended hyperinflation (over 50 percent month-to-month inflation) only began in April 2018. Other measurements, including from the opposition-controlled National Assembly, had it begin in November 2017. However, both sources concur that inflation dropped below 50 percent for the first time in March 2019. The BCV has March and April inflation figures at 34,8 and 33,8 percent, respectively.
According to the Central Bank, total inflation in 2018 reached 130,060 percent. The figures also show that oil export revenue dropped to $29.8 billion in 2018 from $31.5 billion in 2017. Imports totalled $14.9 billion in 2018, up from $12 billion in 2017, but significantly down from an all time high of $66 billion in 2012.
Venezuela has been mired in a deep economic tailspin since 2015 as a result of falling oil prices, economic mismanagement and sanctions. US Treasury sanctions have significantly escalated since Washington decided to back self-proclaimed “Interim President” Juan Guaido in a bid to oust the Maduro government on January 23. Unilateral measures have targeted the Venezuelan economy and particularly its oil sector.
A recent report by the Washington DC-based Center for Economic and Policy Research concluded that US sanctions have caused over 40,000 deaths since 2017 and heavily contributed to the country’s declining oil output. Authors Jeffrey Sachs and Mark Weisbrot argued that sanctions have scuppered any possibilities of tackling hyperinflation and Venezuela’s severe economic crisis.
The Venezuelan government had implemented a comprehensive set of economic reforms last August, which included a monetary reconversion, a devaluation of the exchange rate, and pegging the currency to the Petro cryptocurrency. Nevertheless, the measures failed to deter hyperinflation, forcing the government to raise salaries by devaluing the Bolivar-Petro exchange rate. The latest salary increase took place before May 1, with the minimum wage and food bonus now totaling 65,000 Sovereign Bolivars (BsS), or roughly US $11 at the parallel market rate.
The Venezuelan Central Bank changed course in December, aggressively devaluing the Bolivar with respect to the dollar in the official DICOM foreign currency auctions to maintain pace with parallel market indicators. On May 6, the BCV announced the elimination of currency exchange controls, with “exchange tables” now being run by public and private banks and the exchange rates communicated to the BCV.
Recent measures by the Central Bank, along with restrictions on the amount of Bolivars in circulation, have been credited for slowing down the economy’s inflationary spiral. However, economists have warned that reduced inflation has come at the expense of contracting demand, risking longer-term economic stagnation.