[Economics] Venezuela economy 2019

[Mr.Jhorjan]

 

Link:https://repositorio.cepal.org/bitstream/handle/11362/45000/91/BPE2019_Venezuela_es.pdf

 

Bolivarian Republic of Venezuela
The GDP of the Venezuelan economy fell by 25.5% in 2019, which represents a
cumulative contraction of 62.2% compared to the level of 2013. During 2019 the
the hyperinflationary process that began in November 2017, and as of September
2019 the annualized inflation rate was 39.113%. In 2019, the
external constraint facing the Venezuelan economy, given the lower
oil exports (36% decrease compared to 2018) and limited access
to international financial markets. It is estimated that in 2019 there will be a surplus
in the trade balance of 12.7% of GDP, which means a reduction compared to the
surplus observed in 2018 (17.6% of GDP). Also, for the fifth year
A consecutive drop in international reserves is expected. The authorities
Venezuelans continued the process of dismantling the exchange control and moved to a
system of greater flexibility, which, until November 2019, meant a
depreciation greater than 4,900% of the official exchange rate. By 2020, given the severe
external restriction facing the country, the prolongation of the fall in activity
oil company, the lower availability of fuel in the internal market and the little
recovery of the Venezuelan electricity sector, a further decline in GDP is expected
(14.0%) and inflation that, although it is falling, will remain at levels
historically high.
The financial constraint facing the Venezuelan public sector has become tighter in 2019.
This is the product of four factors: i) limited access to external financing and maintenance
of the situation of cessation of payments in which most of the external obligations of the
public sector; ii) the drop in crude oil production and oil exports, which implies a
decline in the country's main source of tax and foreign currency collection; iii) the
tightening of financial and trade sanctions imposed by the United States and to which
Venezuelan public bodies are subject to, and iv) the lower internal collection in terms of
real.
The scenario described above has resulted in a decline in tax revenue, a drop in the
public spending and a high dependence on monetary financing of fiscal management. To the date
At the time of preparing this report, there are no
official information on the fiscal situation of the
country, but the situation is reflected in the
acceleration of the fall in GDP linked to
government services in the first quarter of
2019, 23.4% compared to the same period of the year
above, and the dynamics of the final consumption of the
Government, which fell 23.1% in the first
quarter of 2019.
The use of monetary financing to
meet the financial needs of the sector
Venezuelan public has had as a consequence
five consecutive years of base growth
currency at rates of three digits or more. Without
However, it should be noted that in 2019 there was
a slowdown and that between October 2018

and

October 2019 Base Growth
monetary policy was 12.855%, lower than the
observed between October 2017 and October 2018
(31.233%). On the other hand, other aggregates
broad exhibit slower growth than
the base given the fall of the money multiplier,
induced by the establishment of a lace
marginal 100% on deposits received
since February 2019.
The mentioned reserve policy implied
that in September 2019 the nominal expansion
annualized credit granted to the private sector
was 6,717%, well below the maximum
reached in January 2019 (144.718%) and the
lowest observed since June 2018. The action
joint behavior of nominal credit
and the high levels of inflation caused
a sustained contraction of real credit
granted to the private sector, and as of September 2019
the annualized drop exceeds 80%. For his part,
nominal interest rates have tended to
increased more than 10 points in the last year,
but when correcting for inflation, very negative real rates are observed which, together with the drop in income
of households and hyperinflation, discourage the demand for assets in bolivars and promote the use
currency to carry out commercial transactions. To mitigate the effect of real interest rates
negative, financial institutions have opted to increase the value of the commissions linked
to credit operations. In October 2019, the Central Bank of Venezuela (BCV) introduced a
norm that indexes the valuation of the commercial portfolio to the evolution of the exchange rate, to
increase the real supply of credit and discourage the acquisition of foreign currency.