Venezuela Experienced Record Growth of 17% in 2004

Venezuela's Central Bank released the official growth figures for 2004 and the numbers are at an all-time high of 17.3%. Much of this was due to the recovery from the oil industry shut-down in 2003, but much of it also came from low interest rates and high oil prices.

Caracas, February 17, 2005—Venezuela’s gross domestic product grew 17.3% in 2004, closing the year with a “notable recuperation” according to the Central Bank of Venezuela. The oil economy, which accounts for 80% of the country’s exports, experienced an 8.7% growth rate. This growth “constitutes the highest level reached since the Central Bank of Venezuela began to calculate the figure (GDP),” said the Central Bank.

The average growth rate for non-oil economy was 17.8%.  All non-oil sectors demonstrated “significant growth”, with a particularly strong showing in construction (32.1%), financial institutions and insurance (26.6%), transportation and warehousing, (26.4%) commerce and repair services (25.5%), and manufacturing and industry (25.4%).  Mining (11.8%), communications (10.2%), and electricity and water (6.9%) also registered notable growth rates.  The private sector grew 18.6% and the public sector grew 11.0%. 

According to analysts in the Central Bank of Venezuela, this economic growth can be attributed to a wide array of factors.  In addition to having recovered from the two-month oil industry shut-down (December 2002-February 2003), in which the economy contracted 7.7%, the Venezuelan economy has grown due to an increase in the demand for consumer goods and an increase in investment.  Inflation, unemployment and interest rates have also decreased, enabling consumers to spend more and businesses to continue to borrow at a healthy rate.  Economic agencies have also benefited from preferential financing. 

Oscar Salcedo, an economist for Sintesis Financiera, an economic consultancy in Caracas, acknowledges that the growth of the Venezuela’s economy is in part due to its recovery from the oil strike. However, he notes that the economy was able to continue to grow throughout the remainder of 2004 due to government spending and low interest rates.  “A rebound was present, but saying that it was the main cause of the growth would be unfair,” he emphasized.

Currently, Venezuela has a surplus of $14.6 billion, an increase of over $3 billion from 2003, when the surplus amounted to 11.4 billion dollars.

“There is a positive momentum, not only in oil, that has trickled down to other areas of the economy,” notes José Cerritelli, an Andean economist with Bear Stearns in New York.  “This would not have happened if oil prices were not so high, allowing the government to increase spending.”

The Central Bank of Venezuela maintains a positive outlook for 2005.  “Evidently, the indicators registered in 2004, in GDP as well as balance of payments, allow for the prediction of sustainable growth in economic activity for 2005.  High oil prices, political stability and a favorable outlook for consumer activity and investment will allow for continued growth this year,” the Bank reported.