Andean Group - December 2006 (ISSN 1741-4466)

On 23 November congress approved the government's budget of US$53.5bn for 2007. The president of the finance committee, Rodrigo Cabezas, pointed out that 45% of the spending would go on health, education, housing and law and order. The government is now devoting 7% of government spending to education, which meant that it was meeting the norm set by the UN agency, Unesco. Even so, the government is still paying a huge price for its borrowing binge: 17% of the budget is still going on paying debt, both foreign and domestic. The 2007 budget is equivalent to 32.7% of GDP. The government is basing its budget for 2007 on growth of between 5% and 6% and a highly conservative forecast for crude oil: only US$29 a barrel. Currently Venezuelan oil is fetching US$49 a barrel.

The government is also budgeting on inflation falling to 10% (it will be around 15%, again, this year) and unemployment tumbling to 7%. In 2006 inflation looks like exceeding 15%. The government had originally budgeted on inflation of 10% in 2006, but increased this target to 12% at the end of September. For this year the government is now forecasting that growth will be over 10%. The planning minister, Jorge Giordani, noted that growth in the third quarter had been 10.2%, according to official figures from the Banco Central de Venezuela, the 12th consecutive quarter of year-on-year growth. In 2005 the economy grew by 9.4%; in 2004 by 17.3%. Previously, the government had forecast that the economy would grow 9% this year and by at least 6% in 2007.

Inflation: In October inflation improved to 0.7%, less than half the 1.9% rate recorded in September. This brought the 10-month rate to 13.4%. The 12-month rate is 15.5 % already above the 2005 rate of 14.4%