Venezuela: Recession wanes in third quarter
November 16, 2010
In the third quarter, gross domestic product (GDP) dropped 0.4% over the same period last year, marking the sixth consecutive quarter of contracting output. Nonetheless, the figure represented an improvement over the previous quarter's 1.9% contraction and beat market expectations, which had the economy falling 1.5%. The improvement continued to be driven by the recovery in the domestic sector. While the pace of decline in private consumption moderated only marginally (Q2: -2.4% year-on-year; Q3: -2.1% yoy), government consumption accelerated to a 3.4% expansion (Q2: +3.1% yoy). Moreover, gross fixed investment swung from a 0.4% contraction in the second quarter to a 4.4% expansion and thus grew for the first time since the first quarter 2009. Furtermore, a build-up in stocks contributed notably to growth. On the external side, exports contracted 17.6% (Q2: +18.6% yoy), while imports swung from a 5.7% contraction in the second quarter to a 6.3% expansion. As a result, the net contribution from the external sector to overall growth plunged from minus 0.8 percentage points in the second quarter to minus 5.3 percentage points. At the sector level, the improvement was entirely driven by the non-oil sector, which moderated the pace decline from a 1.7% drop to a 0.2% contraction. In contrast, the oil sector dropped 2.1%, slightly down from the second quarter's 2.0% contraction. The non-oil sector improvement was led by a rebound in the manufacturing sector, which swung from a 4.0% contraction to a 0.1% expansion. Moreover transport and storage increased 2.7% (Q2: -2.1% yoy), while communications accelerated to a 9.4% expansion (Q2: +5.6% yoy). The Central Bank expects the economy will enter to a growth phase this year, and the full-year-growth in 2010 will climb to 2%.