Venezuela Economic Forecast

Venezuela Economic Outlook

October 9, 2018

The economy remains in dire straits. Despite oil prices hovering at a near four-year high, oil production continues to steadily decline, with the January through August average down nearly a third in year-on-year terms. Moreover, hefty financial obligations overhanging the state-run oil firm PDVSA only adds to the industry’s problems. Nearly USD 1 billion must be paid to holders of PDVSA 2020 bonds this month, which, if it were to default, could put its U.S.-based refining unit CITGO, which was used as collateral, at risk of takeover by creditors. In addition, PDVSA must pay USD 500 million to ConocoPhillips by the end of November, as part of the payment schedule agreed to in August to settle a USD 2 billion arbitration award granted to ConocoPhillips, in order to regain complete control of its oil facilities in the Caribbean. Further exacerbating matters, a delay in repairs at Venezuela's main oil port is likely to put additional pressure on its crude oil exports and thus constrain the ability to collect desperately needed hard currency. Nonetheless, China's decision in mid-September to extend a USD 5 billion credit line to the government should provide, at least temporarily, some breathing room. Meanwhile, authorities continue to roll out sweeping measures in a bid to stabilize the economy, with the latest being the official launch of the petro cryptocurrency on 1 October. Whether they are effective remains to be seen, however.

Venezuela Economic Growth

The economy’s prospects remain grim. Analysts expect it will continue to be battered by rampant hyperinflation, plunging oil production and exchange rate misalignments. The government’s limited access to foreign financing due to financial sanctions also adds to the country’s woes. Given the severity of the crisis, conditions may emerge for a political transition, a scenario that some of our panelists have already begun to factor into their forecasts. FocusEconomics panelists see the economy contracting 13.1% in 2018. In 2019, the panel sees GDP falling 6.7%, which is down 2.5 percentage points from last month’s forecast.

Venezuela Economy Data

Population (million)29.830.230.631.031.4
GDP per capita (USD)12,38115,9296,042-  -  
GDP (USD bn)369481185-  -  
Economic Growth (GDP, annual variation in %)1.3-3.9-5.7-  -  
Domestic Demand (annual variation in %)-1.9-8.8-10.1-  -  
Consumption (annual variation in %)4.7-3.4-7.8-  -  
Investment (annual variation in %)-9.0-16.9-17.6-  -  
Manufacturing (annual variation in %)-0.3-7.2-5.4-  -  
Retail Sales (annual variation in %)-  -  -  -  -  
Unemployment Rate7.57.06.8-  -  
Fiscal Balance (% of GDP)-1.9-12.9-15.6-  -  
Public Debt (% of GDP)31.328.574.7-  -  
Money (annual variation in %)69.764.01011591,121
Inflation Rate (CPI, annual variation in %, eop)56.268.5181-  -  
Inflation Rate (CPI, annual variation in %)40.662.2122-  -  
Inflation (PPI, annual variation in %)52.4-  -  -  -  
Benchmark Interest Rate (%)14.7414.8414.5914.6214.77
Stock Market (annual variation in %)48041.02781173,884
Exchange Rate (vs USD)6.306.306.3010.0010.00
Exchange Rate (vs USD, aop)6.096.306.309.2910.00
Current Account (% of GDP)1.20.7-9.8-  -  
Current Account Balance (USD bn)4.63.6-18.2-  -  
Trade Balance (USD billion)31.627.22.2-  -  
Exports (USD billion)88.874.738.3-  -  
Imports (USD billion)57.247.536.1-  -  
Exports (annual variation in %)0.0-15.8-48.7-  -  
Imports (annual variation in %)0.0-16.9-24.0-  -  
International Reserves (USD)21.522.116.411.09.7
External Debt (% of GDP)35.928.272.5-  -  

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Venezuela Facts

Bond Yield5.500.0 %Aug 19
Exchange Rate248,8320.0 %Aug 17
Stock Market399,5922.04 %Oct 18

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