November
19, 2004
The Venezuelan economy
is continuing to rebound
Published by WMRC Daily Analysis
Copyright 2004, World
Markets Research Center limited.
"The economy is continuing to rebound
from the depths reached in 2002-2003,
with GDP growth hitting 15.8% year-on-year.
Implications
While the growth figures are indeed
being flattered by the low base of comparison,
other factors - including the relaxation
of capital controls - are also facilitating
economic expansion (…)
Chávez administration
has positive economic news, for a change
President Hugo Chávez has not
had a huge amount of positive economic
news to trumpet since he was first elected
in 1998. GDP report could therefore
be regarded as something of a triumph,
with growth broadly based and not focused
on the oil sector:
The economy grew 15.8%
year-on-year with GDP at constant 1997
prices totaling Bs30.9trn (US$16.12bn).
The comparable figure for 2001 was Bs31.2
trn.
Private-sector activity
was up 17.4% y-o-y, with that of the
public sector expanding by 11.2%.The
output of the oil sector, which typically
represents around 305 of GDP and half
of government revenues, expanded by
a more modest 2.7% y-o-y (…) Oil
export earnings are calculated at US$23.705bn
so far in 2004 (…)
Construction expanded
by 40.3% y-o-y, with financial activity
growing by 27.2% and manufacturing by
20.7%.
A low basis of comparison,
brought about by contractions in GDP
of 8.9% and 7.6% in 2002 and 2003 respectively,
inevitably continues to flatter the
figures (…)
Nevertheless, there are
other factors that have been supporting
growth. Currency administration board
Cadivi, set up when capital controls
were introduced in February 2003, has
been relaxing its iron grip on foreign
currency. This has facilitated a regularization
of private-sector activity (…)
As a consequence of the controls, liquidity
in the Venezuelan banking system has
surged, with interest rates turning
negative in real terms. This has prompted
resurgence in credit. Finally, political
turbulence in the wake of the failed
recall referendum on Chávez's
rule has eased somewhat, with the government
and business leaders now flirting with
the idea of meaningful negotiations
(…)
Balance of payments
remains in red
Also, the Central Bank of Venezuela
released the figures pertaining to the
balance of payments. These showed the
current account running a surplus of
US$4.108bn, which compares with the
positive balance of US$3.910bn recorded
in the year earlier period. Oil prices
were running 37.15 higher while non-oil
exports climbed by 29.8% y-o-y. the
current account surplus went a long
way to covering the deficit on the capital
account, which came to US$4.823bn over
the period. Overall, the balance of
payments was in the red to the tune
of US$1.608bn (…)
The flexibilisation of
capital controls and calmer political
atmosphere that is prevailing - at least
for now - are both positives, while
buoyant oil prices are allowing the
Venezuelan government to continue its
pump-priming policies (…)
While Chávez
and his team should be able to boast
of GDP growth in excess of 13% this
year, achieving annual expansion of
4% would be a result in the longer term
(…)".
