Caracas, April 9, 2022 (venezuelanalysis.com) ‒ Venezuela has recorded the lowest monthly inflation since 2012.
The country’s Central Bank (BCV) said consumer prices rose just 1.4% in March, less than half of February’s 2.9%. The mark represents the seventh consecutive month with single-digit inflation.
Cumulative inflation stands at 11.3% for the year and 284.7% for the past 12 months, a significant turnaround after the Caribbean nation has experienced hyperinflation in recent years. Cumulative inflation reached 130,000, 9,584, and 2,961 percent in 2018, 2019, and 2020, respectively.
Lower inflation is seen by analysts as one of the factors that allowed the Venezuelan economy to stabilize and grow in 2021 for the first time in seven years. According to BCV figures, the country’s GDP has shrunk by more than two-thirds since 2015.
According to Nicolás Maduro’s government, GDP grew by 4% last year and forecasts are more optimistic for the future.
In a recent report, Credit Suisse raised its growth forecast for 2022 from 4.5% to 20%. The Swiss investment bank stressed that the figure “is not a typo”, arguing that the Venezuelan economy “hit bottom” in 2020.
“If we’re accurate, these could end up being among the world’s fastest growing impressions in recent years,” the report added. Credit Suisse also raised its GDP growth forecast for 2023 from 3% to 8%.
The financial institution based its forecast on the expectation that Venezuela’s oil production would grow by more than 20%. The upbeat outlook is shared by other analysts, with economist Francisco Rodríguez also expecting double digit growth supported by increased oil production and high market prices.
The country’s crude production has been rising steadily after hitting historic lows in the second half of 2020. Although hampered by crushing US sanctions, Venezuela’s main industry had an average production of 558,000 barrels per day (bpd) in 2021, which is 12% more than in 2020. Production was measured at 680,000 bpd in February by secondary OPEC sources.
In its report, Credit Suisse says a relaxation of US-led unilateral coercive measures could further boost the South American nation’s oil sector. A surprise visit in early March by a White House delegation to Caracas put sanctions relief on the table as Washington sought to replace Russian imports. However, the backlash from hardliners has caused the Biden administration to back down.
Since 2018, the Maduro government has taken an increasingly orthodox and liberal path in its efforts to rein in the inflationary spiral. Measures included lifting price and exchange controls, tax breaks for imports, freezing credit, increased private sector participation in state-owned enterprises, and de facto dollarization.
In recent months, the Venezuelan Central Bank has significantly increased its supply of foreign currency to exchange tables operated by private banks in an effort to keep the bolivar-USD exchange rate under control. Currency devaluation, stimulated by speculation, has traditionally been one of the main drivers of inflation.
Economic portal Banca y Negocios reported that BCV provided US$1.5 billion in foreign exchange in 2021 and the amount is on track to double in 2022.
The improving economic outlook also saw the government decree a significant wage increase for the first time in months. The minimum wage was set at 126 bolivars (BsD), or about $30, compared to 7 BsD. Public employees receive an additional food subsidy of BsD 45 (about $10).
Wage increases are at their highest since mid-2018 but remain far from covering the cost of living, with many public sector workers taking second jobs or migrating to the private sector or abroad.
On April 6, left-wing political organizations and trade unions staged a expression before the Ministry of Labor in Caracas to demand that wages be indexed to the basic food basket, which is currently estimated at more than 350 dollars per month.
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