Venezuela’s Economy Grew 4.9 Percent in 2008

Venezuela’s economy continued to grow for a fifth consecutive year, posting an estimated 4.9 percent economic growth in 2008, according to numbers the Central Bank of Venezuela (BCV) announced on Monday.
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Carora, December 30, 2008 (venezuelanalysis.com)– Venezuela’s economy continued to grow for a fifth consecutive year, posting an estimated 4.9 percent economic growth in 2008, according to numbers the Central Bank of Venezuela (BCV) announced on Monday.

“This economic expansion is with a clear social emphasis, aimed at fighting poverty, promoting equality, and human development generally,” the bank said in its statement.

The estimates indicate a recent economic deceleration in Venezuela, whose Gross Domestic Product (GDP) grew 8.4 percent in 2007, amidst a global economic crisis that has caused oil prices to plummet.

This month concludes Venezuela’s twentieth consecutive quarter of economic growth, after a severe economic downturn in 2003 caused by an oil industry shutdown implemented by the political opposition to President Hugo Chavez. The aftermath of the politically motivated “oil strike” allowed Chavez allies to gain control of the industry, previously in hands of oil executives connected to previous administrations.

"Since the government got control over the oil industry five and a half years ago, the Venezuelan economy has nearly doubled in size, growing about 95 percent after adjusting for inflation,” said economist Mark Weisbrot, of the Center for Economic and Policy Research, in Washington D.C.

“This is unprecedented growth for Venezuela and the fastest in the hemisphere during this period,” Weisbrot explained.

Contrary to the common perception of an overly statist Venezuela, Weisbrot noted that in these years “the private sector has grown faster than the public sector,” adding that “the vast majority of this growth has been in the non-oil sector of the economy.”

The BCV report demonstrated that in 2008 the GDP of the oil sector rose 3 percent, while the non-oil sector grew by 5.3 percent.

In a speech last week, Venezuela’s Chavez detailed his administration’s aims to increase production of gold, steel, iron, cement, and agricultural products in the upcoming year, to “increase the county’s income by means of non-oil exports.” Oil exports constituted 93 percent of exports for the country this year.

Despite the drop in oil revenue, Venezuela’s growth topped the expected regional average, forecast at 1.9 percent by the United Nations’ Economic Commission for Latin America and the Caribbean.

Weisbrot recommended that the Venezuelan government “increase spending on public works, infrastructure, public capital formation, as well as government services such as health care, as the United States and other governments will do this year,” in order to counteract the effects of the global slowdown and its impact on private spending, he said.

Venezuela had $37.2 billion in international reserves as of December 24, according to Bloomberg, in addition to $9.6 billion in the National Development Fund, which may also help to finance government spending in 2009.