Oct. 3 (Bloomberg) -- Venezuela is basing its 2010 budget on assumptions that oil prices will fall and the economy will grow, President Hugo Chavez said.

The government will propose a budget Oct. 15 based on an average oil price of $40 a barrel, economic growth of 0.5 percent and inflation of 20 percent to 22 percent, Chavez said late yesterday on state television.

The country, the biggest net oil exporter in the Americas, cut its budget in March after oil prices fell to almost half the budgetary assumption of $60 a barrel and state oil company Petroleos de Venezuela SA failed to boost output to a planned 3.5 million barrels a day. Economists surveyed by Bloomberg estimate that 2010 inflation will be 33 percent and the economy will grow 0.6 percent.

“We need to be prudent in our calculations,” Chavez said. The country’s oil exports have fetched an average $52.62 a barrel this year.

Chavez and Finance Minister Ali Rodriguez have given few details about how they plan to return the country’s economy to growth after it suffered its first contraction in five years in the second quarter.

Planning Minister Jorge Giordani said the government would try to boost construction, especially of homes.

An auction of $3 billion in dollar-denominated bonds has attracted $19.5 billion in orders, Chavez said. Funds from the bond sale, which may be expanded to $4 billion, will be used for budgetary expenses and investment, he said.

Chavez and his Cabinet approved an extra 4 billion bolivars ($1.86 billion) in health spending this year. He said the more than 2,000 community clinics that were without a doctor two weeks ago now have at least temporary doctors assigned to them.

The country will end 2009 with inflation above 20 percent, Chavez said. Accumulated inflation so far this year is 15.7 percent, he said.

To contact the reporter on this story: Steven Bodzin in Caracas at sbodzin@bloomberg.net

Last Updated: October 3, 2009 03:03 EDT