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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

April 15, 2022

Has Venezuela’s Economy Started to Turn a Corner?

Venezuela’s rate of inflation has fallen, and some analysts are expecting double-digit growth in the country’s economy this year. Venezuela’s central bank is pictured. // File Photo: Venezuelan Government.

Q

  • Inflation in Venezuela hit its lowest level in almost a decade in March, finishing the first quarter of 2022 with a rate of 11.4 percent, according to data from the Andean country’s central bank. Prices in the country have stabilized, thanks in part to the wider circulation of hard currencies, including the U.S. dollar. Some analysts estimate that Venezuela’s economy could grow 20 percent this year due to an increase in hydrocarbon output and the rising global price of oil, Bloomberg News reported. What accounts for the slowdown in consumer price growth in Venezuela, and will President Nicolás Maduro’s policies allow for this trend to continue? What are the drivers for economic growth in the Andean country, and can they be sustained in the long term? What sectors would benefit the most from continued economic growth in Venezuela?

A

Ruth Krivoy, country analyst for Venezuela at GlobalSource Partners and former president of the Central Bank of Venezuela: “Exchange rate policy has been the main anti-inflationary pillar, with heavy sales of foreign exchange by the central bank, within a highly contractive monetary and fiscal policy stance, that slowed down consumer price growth, while deepening recession and feeding inequality. Last November, the central bank also imposed a ceiling on the exchange rate that banks apply when reselling to clients the dollars purchased weekly from the central bank. Recently, the bank began issuing foreign exchange risk hedging securities to sterilize high-powered money after pausing its open-market operations for three years. A permissive import policy geared to address shortages and widespread dollarization also helped. Authorities are focused on stabilizing the nominal exchange rate to lower inflation and ‘de-dollarize’ the economy…”

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