Venezuela Economic Outlook
GDP grew robustly last year on the heels of an extremely low base effect. That said, activity has likely weakened so far in 2023. Oil output grew around 5% year on year in January-September, following an average growth rate of 25% last year. Moreover, the price of the country’s oil has averaged notably lower this year to date than in 2023. Additionally, inflation skyrocketed in January-September. More positively, in mid-October, the U.S. eased several restrictions on sectors including oil and gas, gold mining and bond trading. Shortly after, state oil company PDVSA signed several spot sale contracts. In politics, in October’s opposition primary election, Maria Corina Machado was selected as the frontrunner for the 2024 presidential elections. However, in late October, the country’s top court suspended the elections results, which could cool the recent warming of ties with the U.S.
Inflation fell to 317.6% in September from 394.8% in August. Inflation has surged so far this year on a plunging currency. Price pressures are set to average lower in 2024 than in 2023. However, inflation will remain elevated, fueled by monetary financing of the fiscal deficit and a weaker bolívar. A faster-than-expected depreciation of the bolívar is the key upside risk.