Venezuela Inflation March 2020

Venezuela

Venezuela: Inflation falls to two-year low in March but remains sky-high and is expected to spike on Covid-19 fallout

April 24, 2020

National consumer prices rose 13.3% from the previous month in March, down from February’s 21.8% month-on-month increase and marking the lowest print since June 2017, according to data released by the Central Bank of Venezuela (BCV) on 24 April. The deceleration reflected slower growth in prices broadly across all sub-components of the index, with prices for rent and communications seeing the sharpest slowdowns.

Similarly, inflation receded to 2,431% in March (February: 2,911%), marking the lowest print since March 2018. In addition to aggressively tightening the amount of bolivars that circulate in the economy, authorities also rolled back stringent price controls and liberalized foreign exchange transactions last year, enabling the private sector to play a greater role in the import and sale of consumer goods. This, coupled with a rapid dollarization of the economy, have helped quell price pressures somewhat. Meanwhile, annual average inflation stood at 4,650%, down from 6,409% in February.

Going forward, inflation is expected to pick up, however. Amid the Covid-19 fallout, U.S. sanctions and marked currency depreciation—owing to the collapse in global oil prices and pressures stemming from the parallel market for dollars—are leading to acute shortages of gasoline and food products. To tame the bout in inflation, on 24 April the government reintroduced price controls on 27 food products, and hiked the minimum wage as well as pensions and food bonuses. The move is likely to aggravate shortages and spawn parallel markets.

Analysts see inflation ending 2020 near 2,580%, before falling to around 960% by the end of 2021.


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