The finance minister, Tobías Nóbrega, reckons that the economy contracted by between 14% and 16% in the second quarter. Nóbrega emphasised that this was a personal estimate and that the final official calculations were not yet complete. Venezuela's GDP contracted by a record 29% in the first quarter of 2003. The IMF is forecasting that the economy will contract by 17% this year.
Although the government will try to blame the 63-day general strike inspired by the opposition for the dismal figure, the strike ended in February. The big problem since then has been the clumsy system of exchange controls, which has starved industry of inputs, and the government's subsequent introduction of currency and price controls.
For the year. The finance ministry is forecasting that the economy will contract by 10% this year. The ministry claims that growth next year will easily be 5%, provided the oil price averages US$25 a barrel.
Nóbrega said that he expected oil production this year to average 2.8m bpd. Next year, he said, production would increase to 3.2m bpd.
To bond investors, all that matters is that Venezuela can pump oil to provide the dollars to service its debt. These investors have almost no interest in the real economy, though a collapse here could lead to the repudiation of the debt.
Domestic. The poor state of the domestic economy is clear from the plummeting demand for credit. Figures from the banking superintendency show that lending by the banks fell by 16.8% in the first half of the year, to Bs7.7tn (US$4.8bn). Lending had been Bs9.3tn at the end of 2002. The banks are switching to buying government and central bank paper. Their holdings of securities increased by 79% in the first half, to Bs11.2tn. As government paper is free of tax, the banks' profits rose by 30%, to Bs763bn (US$477m), in the first half of the year.
Another sign of the grisly state of the domestic economy is the unemployment rate. This reached 19.2% in May, according to figures released by the national statistics institute.
The new figures show that 2.3m people are now unemployed out of a potential workforce of 11.9m. The total population is 23m. May's unemployment rate is just 0.1% higher than in April, but is 3.9% higher than the same month last year.
The current unemployment rate has been at an historically high level for four years, and most analysts expect it to grow higher still in the remainder of 2003 as a result of the knock-on effects of the general strike and then currency and price controls.
Current predictions are that the unemployment rate will hit between 22% and 25% by year-end. Around half of the population is already working in the informal sector of the economy (which is not included in the official unemployment figures), according to recent estimates.
If public sector workers are stripped out of the figure, probably only one in 10 people in work are employed by the private sector in tax-paying and pensionable jobs.
So the measures President Hugo Chávez introduced in April 2002 to prevent companies from making redundancies, which have been extended to January 2004, are beside the point.
Indeed, despite the regulations, the new figures reveal that 540,000 people lost their job between May 2002 and May 2003.
Small business: President Chávez announced a plan to help small and medium-sized businesses, which have been particularly badly hit by the ongoing recession. The president said the state would seek to buy first off from smaller companies and cooperatives.
Exchange controls: President Chávez said that exchange controls will remain. For the past six weeks the government has been hinting that it would overhaul the system. Chávez said that the system would be made more flexible, but the essence of it would remain in place.
The government introduced exchange controls at the beginning of February. The purpose was to prevent the haemorrhaging of foreign exchange. The controls have been effective and foreign exchange reserves have recovered from the dangerously low levels (verging on US$10bn) they had hit at the end of January; they are back at more secure levels of over US$16bn. Chávez said that now this had happened the tourniquet could be loosened.
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