March 2, 2005
2004/2005 recovery and growth

By Domingo Maza Zavala (President of Venezuelan Central Bank)
(El Nacional) - "We know we have the same GDP as in 2001, simply by comparing its growth during 2004, which was 17% with the negative growth of the GDP during 2002-2003, which was 7%. According to different analysts and observers, this can be interpreted as the beginning of a growth period for this year.

The growth rate of last year's GDP shows historical values for that variable, according to calculations made by the Central Bank.

This is a fact worth mentioning, and the causes are worth mentioning too.

We cannot say this is a 'natural' reaction after a drop in the economy, because there is no such thing as an economical pendulum that describes variations in space and time. There have been, of course, some causes easy to identify: oil prices, relatively high; expansive public expenditure, which is a driving cause; and a positive, more relaxed attitude from the private sector.

Proof of this is the non-oil GDP recovered by 18%, compared to a drop of 8% during 2003. On the other hand, consumer 's inflation rate dropped 19%, which shows a clear contraction: 31% in 2002 and 27% in 2003.

Another favourable factor of the recovery was a greater provision of foreign exchange through the controlled market. Using a fix official exchange rate of 1.920 Bolívares per U.S. dollar, after a 20% adjustment in February last year. Regarding goods and services, this market expanded considerably, adding value in order to satisfy an increasing demand. Private consuming expanded 17% and real investment expanded more than 40%.

As well as a recovery, there were productive capabilities that stayed unutilized (an estimate of 50%) and available human resources; unemployment dropped to 11% by the end of last year, compared to 17% in 2003. Bank credits (production, investment, consuming) more than doubled compared to the past year, while the interest nominal rates showed very moderate levels: active 18% and passive 11% (...)

International Venezuelan accounts also showed favourable results: global balance of payments showed a positive balance of US$ 1.9 billion, placing international monetary reserves in US$ 23.5 billion by the end of last year. The current account showed an active position of US$ 23.5 billion, which is very important. Nevertheless, the outgoing net capital and financing was over US$ 10 billion, compared to last year 's US$ 5.4 billion, as a result of foreign, public and private debt as well as PDVSA 'S debt payments (...)

Being able to balance the economical activity with the one of 2001, indicates that this year the economy will grow approximately 6 and 7%. High oil process allowed a constant input of foreign currency for no less than US$ 23 billion and the improvement of the physical situation (tax administration has made remarkable progress in the collection process), as well as potential public and private financing. This will make way to the growth possibilities, with an inflation rate not higher than 15%.