Mérida, 23rd November 2012 (Venezuelanalysis.com) – The Venezuelan economy grew by 5.2% in the third quarter of 2012, the eight consecutive quarter of growth since Venezuela moved out of recession at the end of 2010.
“Venezuela has entered a new phase in its stable, sustainable growth,” said Planning Minister Jorge Giordani in a press conference on Tuesday. According to a recent United Nations report, Venezuela is among the fastest growing economies in Latin America this year.
The increase in Gross Domestic Product (GDP) from July to September this year was weighted toward non-oil related activities, which grew by 5.4%, compared with 1.1% for petroleum related activities. The private sector grew 5.7% and the public sector 3.4%.
The top five sectors experiencing economic expansion were; financial services (35.9%), construction (12.6%), commerce (9.7%), community services (7.8%) and communication (6.9%).
According to the Venezuelan Central Bank (BCV), the main factors driving growth include higher imports of raw materials and consumer goods, greater financing by public and private banking sectors, and the boost to the construction industry given by the government’s housing construction program launched in April 2011.
“Construction sector activity is pushed by the great motor of the Great Housing Mission, growing from 10.9% (in the 2nd Q 2012) to 12.6%,” said BCV president Nelson Merentes, who pointed out that the construction sector began its current phase of growth toward the end of last year.
Speaking on Tuesday, Merentes further highlighted that accumulated GDP growth for this year (5.6%) is above the government’s estimate of 5%, upon which the 2012 budget is based.
The BCV’s report also indicates that the higher levels of investment and consumer spending helping to drive this year’s growth rates are related to “the high employment level, the increase of the real salary, and government spending”.
Meanwhile, annualised inflation for the first ten months of this year is 19.9%, well below last year’s annual inflation of 27.6%. Officials are confident that 2012 inflation will finish below the government’s aim of 20 – 22%.
Merentes argued that it is important to measure the impact of GDP growth on social inclusion, and reported that the Venezuelan government “is making very concrete plans to combat poverty and unemployment”.
However, speaking in an interview yesterday, Merentes explained that with unemployment between 6 – 7% and extreme poverty hovering around 7% (down from 25% in 2002), a part of the population is still not experiencing the benefit of the economic upswing.
“That’s to say, that although there’s a group that still isn’t experiencing the potential that (economic) growth of this nature has, in the future they will see this as growth continues improving,” he said.
Some Venezuelan economists have expressed reservations that Venezuela’s economic growth is “unsustainable” and overly-dependent on oil income and public spending.
Venezuelan economist Jose Manuel Puente claimed that current economic expansion is based on a “boom” of income from oil revenues, and that the government was using this to increase public spending to “generate an illusion of harmony [by] making some key sectors of the economy grow”.
Speaking on private TV channel Televen yesterday, he further argued that there are “imbalances” in the Venezuela economy, such as the falling value of the Bolivar, with the dollar currently selling on the black market at almost three times the government’s official rate. According to Puente, a resulting devaluation of the Bolivar could have a negative impact on growth and inflation.
Yet officials have expressed confidence in continued economic growth. “We’ll keep growing for the rest of 2012, [and] we’re already preparing the fiscal study for 2013,” said Merentes on Tuesday.