Venezuela: Economy rebounds in first quarter, leaving recession behind
May 17, 2011
In the first quarter, GDP grew 4.5% over the same period last year, overshooting market expectations of a 1.7% increase and confirming that Venezuela has emerged fully from a two-year recession. The figure represents a significant improvement over the revised 0.3% increase tallied in the fourth quarter (previously reported: +0.6% year-on-year) and represents the fastest growth rate since the second quarter of 2008. In addition, according to revised data released by the Central Bank, the economy contracted 1.7% in 2010, which is 0.3 percentage points below the previous result reported in March. Domestic demand led the expansion, growing 9.6% year-on-year in the first quarter (Q4: +7.6% yoy), mainly due to brisk government spending rather than private consumption. Government consumption jumped 10.4% (Q4: +3.7% yoy) in the first quarter, backed by higher oil revenues, while private consumption increased 3.7% (Q4: +0.4% yoy). Moreover, investment expanded for the first time in two years. Exports of goods and services rose 5.1% in the first quarter (Q4: -5.9% yoy) due to higher oil shipments, while imports surged 22.6% (Q4: +24.1% yoy), supported by buoyant domestic demand as more foreign currency became available in domestic markets according to a Central Bank report. As a result, the net contribution from the external sector to overall growth stepped up from minus 8.6 percentage points in the fourth quarter to minus 6.9 percentage points in the first quarter. At the sector level, the strong Q1 performance was driven by the non-oil sector (Q1: +5.3% yoy; Q4: -0.5% yoy), in particular by manufacturing and commerce. On the other hand, the oil sector contracted 1.8% over the same period last year. On 6 April, president Chavez stated that the economy may expand between 3% to 4% percent this year on the back of higher oil prices, which almost doubles the current official forecast of 2.0%.