Caracas, May 29, 2008, (venezuelanalysis.com) – The Venezuelan economy has registered its eighteenth quarter of uninterrupted economic growth, Planning and Development Minister Haiman El Troudi announced Thursday. Central Bank figures show an overall increase of Gross Domestic Product by 4.8 percent for the first quarter of 2008, however this is down from 8.8 percent in the same quarter last year.
Venezuela has enjoyed high economic growth for several years fuelled by skyrocketing oil prices and high public expenditures on social programs that benefit the country’s poor. However, Venezuela closed 2007 with 22.5% inflation, accompanied by a rapidly devaluation of the country’s currency, the bolivar, on the black-market.
Anti-inflationary policies introduced by the government have cut into consumer demand, causing the economy to decelerate.
Since January, the government has issued dollar-denominated local debt bonds to soak up excess liquidity in the economy that is present due to foreign exchange controls designed to prevent capital flight.
The measure has helped to strengthen the non-official rate for bolivars, from almost 7 to the dollar in December to about 3.1 per dollar in May. The bolivar officially trades at 2.15 to the dollar.
Minister El Troudi denied a plan to introduce a dual rate, which would allow essential imports like food and medicine to be purchased at the current price, while luxury good would be purchased at a devalued rate.
Other anti-inflationary measures include a reduction of government spending and an increase in imports to ease food shortages that were driving up prices.
The government has also raised interest rates twice this year to encourage savings and to reduce credit card spending.
Despite the deceleration, El Troudi pointed out that the Venezuelan economy continues to expand, “independent of the adverse situation of the global economy, where some countries of the first world are entering into recessions.”
In the context of the overall quarterly increase of Gross Domestic Product of 4.8%, the communications sector grew 17.6%, accompanied by a 5.7% growth in services, and lower increases in the manufacturing and construction industries.
The Central Bank also reported a $10 billion surplus for the first quarter, the result of soaring oil prices.
A 70.2 percent increase in oil prices in the first quarter compensated for a 2.1 percent decline in the volume of crude exports, the Central Bank figures showed.
The private manufacturing industry also registered 18 consecutive quarters of expansion, with an increase of 1.3% determined fundamentally by the increased production of tires and plastics (16.7%), processing of non-metallic minerals (8.9%), paper production (8.3%), food, beverages, and tobacco (6.2%), and printing (4.7%).
In the food industry, growth was observed in meat production and processing, and derivatives (14.1), bakery products (11.4%) and other food products (10.6%).
The construction industry also registered an overall increase of 2.6%, with 0.2% increased derived from the public sector, and within this 9.9% corresponded to construction in the state oil sector.
In the private sector 9.5% corresponded non-residential construction, principally industrial complexes and commercial centers.
State services also reflected an overall expansion of 4.5%.
However, contraction was registered in metals (steel, aluminium etc) production (-20.5%), car manufacturing (-12.6%), steel and aluminium processing (-10.7%), the finance sector (-6%) and chemical production (-4.8%).
According to an article by the Bolivarian News Agency today, labour disputes impacted significantly in the contraction of the metals sector.
Inflation remains high, at 8.9% for the first for months of the year and some analysts have predicted that increased public spending in the lead up to state and local elections in November could lead to a renewed weakening of the bolivar.
In contrast, El Troudi said, “The Venezuelan economy is buoyant, it is showing very positive results and we can say that although there is a deceleration in this first quarter, we begin to see other early indicators for the good performance of the economy in the second, third, and fourth quarters of the year.”