Venezuela: Inflation hits 14-month high in March
April 19, 2021
National consumer prices rose 16.1% from the previous month in March, down markedly from February’s 33.8% month-on-month increase and marking the lowest print in 12 months, according to data released by the Central Bank of Venezuela (BCV). The moderation was driven by a broad-based reduction in price pressures, with softer rises in key subindices such as food, drinks and transport costs.
Nevertheless, inflation rose to 3,012% in March—a 14-month high—from 2,937% in February. March’s reading was likely influence by a low base effect due to the pacifying impact that the Covid-19 pandemic played on price pressure in the same month a year prior. Meanwhile, annual average inflation stood at 2,662%, creeping up from 2,557% in February.
Looking ahead, inflation is expected to ease throughout the rest of the year and into 2022. The continued dollarization of the economy—with estimates indicating foreign currencies now constitute 70% of total transactions—should counterbalance the inflationary impacts from the unremitting depreciation of the bolivar and elevated money supply. Meanwhile, focus remains on whether the Biden administration takes a different approach to U.S. sanctions on Venezuela, with any alleviation of the Trump-era “maximum pressure” campaign likely to see an uptick in exports and an easing of import disruptions.
Author: Stephen Vogado, Economist