Venezuela Economic Forecast

GDP should have increased at one of the region’s fastest annual rates in 2022 on the heels of an extremely low base effect. However, the economy has seemingly lost steam so far in 2023. Oil output expanded feebly in annual terms in January-July, following an average growth rate of more than 20% last year. Moreover, the price of the country’s oil has averaged lower this year to date than last year. In addition, inflation surged in the first seven months of 2023. More positively, the U.S. government is reportedly considering easing sanctions on the country’s oil sector if the regime allows free and fair presidential elections. That said, the National Assembly’s decision in late August to name a Maduro loyalist to head the electoral authority appears to point in the opposite direction.

Inflation fell to 398% in July from 404% in June. Inflation has surged so far this year amid a plunging currency. Price pressures are set to average higher in 2023 than in 2022, stoked by substantial monetary financing of the fiscal deficit and a falling bolívar in both the official and parallel markets. A faster-than-expected depreciation of the bolívar is the key upside risk.