26 August, 2005
Venezuela: first-half growth exceeds expectations

(Oxford Analytica) - "The Venezuelan Central Bank (BCV) reported on August 18 that second quarter GDP growth reached 11.1%, year-on-year, bringing growth for the first half of 2005 to 9.3%. In the second quarter, growth continued to be stronger in the non-oil economy, up 12.1%; the oil sector grew just 2.5%. Domestic demand is driving current growth:

Private sector consumption rose by 18.1% over the period, stimulated by improved access to credit, the government raising some salaries, and the impact on disposable income of both the government's social programmes and associated rise in employment -- the number of people employed rose by 3.7% in the first six months of this year.

Public sector consumption rose by 6.7%, particularly in the fields of defence and education.

Gross fixed capital formation increased by 41.6%, with public sector construction growing particularly quickly.

This pattern of exuberant domestic demand is likely to continue well into 2006, generating growth of at least 7% this year, and only slightly lower next year. This will be sustained primarily by rising government expenditure, which, in turn, is partially dependent on high oil prices. Enhanced government access to the BCV's foreign reserves will ensure that even an unexpected sharp downturn in oil prices over the next 18 months would not necessarily lead the government to rein in spending significantly (...)".