Venezuela enters recession, inflation tops 63%

CARACAS, Venezuela – Venezuela confirmed Tuesday, December 30, that it has entered recession, while annual inflation topped 63%, exacerbating the outlook for an economy already hit by crippling shortages and crashing oil prices.

The South American oil giant’s economy shrank 2.3% in the third quarter, after contracting 4.8% in the first quarter and 4.9% in the second, the central bank said, the first time it has released the country’s growth figures this year.

That is a new blow for leftist President Nicolas Maduro, whose approval rating is at a low of 24 percent going into legislative elections next year that could force the followers of late socialist firebrand Hugo Chavez from power for the first time since 1999.

Analysts had said for months that Venezuela was likely in recession.

But the diagnosis had not been confirmed by official statistics, which the central bank, in violation of its own rules, has released only irregularly as the economy has worsened in recent months.

The inflation rate, a figure that had not been released since August, came in at 4.7% for the month of November and 63.6% for the year – among the highest in the world.

Maduro’s government has introduced mandatory price cuts and rent controls in a bid to rein in the increases but has not managed to get the inflationary spiral under control.

Severe shortages

The problem has been aggravated by severe shortages of basic goods.

Venezuela is estimated to have the largest oil reserves in the world but depends largely on imports for basic goods, including food and medicine.

Venezuelans can buy gasoline cheaper than bottled water but currently struggle to find milk, flour, cooking oil, toilet paper, deodorant, shampoo and other products.

The shortages helped fuel violent protests against Maduro’s government from February to May in which 43 people were killed.

The central bank said the protests “prevented the proper distribution of basic goods to the population and the normal production of goods and services.”

It blamed the demonstrations for an “economic reversal and a fall in economic activity.”

Price increases were the sharpest for housing, food and alcoholic beverages, and restaurants and hotels, it said.

The central bank has not published the index that measures scarcity since March, when it found that 19 categories of key products were experiencing “serious supply problems.”

Falling crude prices have taken an added toll on a country that gets 96 percent of its foreign currency from oil.

According to Maduro, Venezuela’s oil export price has plunged from $95 a barrel in September to $48 today.

He accused the United States of waging an “oil war” to hurt major crude producers including Venezuela and Russia.

A boom in shale oil in the United States has upended the world market, causing crude prices to hit a string of five-year lows in recent weeks.

Producers’ cartel OPEC added to the downward momentum last month by ruling out a production cut — a decision pushed through by wealthy Gulf states over Venezuela’s furious opposition. – Rappler.com