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Venezuela Forecasts Economy to Shrink More Than Expected 2.5% This Year
Venezuela’s economy will contract 2.5 percent this year, contradicting an earlier government forecast for it to grow, because of the global economic crisis, according to the 2011 budget proposal.
Venezuela’s oil industry will shrink 1.4 percent and the non-oil economy will decline 2.6 percent in 2010, according to the budget plan submitted by Finance Minister Jorge Giordani to the National Assembly yesterday. The government’s prior forecast, made in March, predicted gross domestic product would rise 0.5 percent this year.
“The effects of the various crises were concentrated in the first half of 2010 and will continue for several quarters with smaller declines,” the document said.
Giordani said yesterday that GDP was recovering after hitting “bottom” last year when it contracted 3.3 percent. The economy, which has fallen for five consecutive quarters, remains in recession even as the rest of the region returns to growth.
Central Bank President Nelson Merentes said yesterday that the economy may post growth in the fourth quarter. A drop in foreign investment due to nationalizations and lower oil prices caused the economy to shrink 3.5 percent in the first half of 2010.
The economy will grow 2 percent in 2011, as the Western Hemisphere’s highest inflation rate slows, Giordani said. The economy should grow 2.4 percent in 2012, according to the document.
The 2011 budget proposal calls for 204.2 billion bolivars ($47.5 billion) of spending, a 28 percent increase from 2010. Consumer prices may rise 23 percent to 25 percent next year.
Venezuela is South America’s only economy forecast by the International Monetary Fund to experience negative growth this year.
To contact the reporters on this story: Corina Rodriguez-Pons in Caracas at crpons@bloomberg.net; Jose Orozco in Caracas at jorozco8@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
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