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IMF Wrong on Continuing Recession in Venezuela, Giordani Says

Venezuelan Finance Minister Jorge Giordani rejected the IMF’s conclusions that the government’s poor fiscal policy is causing a five-quarter recession to continue into the second half of 2010.

Venezuela will be constrained by “severe supply bottlenecks” and a “weak policy framework,” the IMF said in its World Economic Outlook published today. The country’s economy will shrink 1.3 percent this year before returning to growth of 0.5 percent in 2011, the report said.

“It’s the IMF that’s in crisis,” Giordani said in an interview on Union Radio. “They did not foresee the world crisis.”

Venezuela’s economy is recovering and can operate with fewer imports that require the government to delve into foreign currency reserves, Giordani said. The dismantling of the parallel foreign exchange market in May and the introduction of a state-run system, known as SITME, has put a brake on capital flight and should ensure “healthy” growth, Giordani said.

“The Venezuelan economy is in the gym right now losing all the fat it had,” Giordani said.

IMF report predicted inflation of 29.2 percent this year and 32.2 percent in 2011, the highest in the region.

The government policy of nationalizing much of the food industry has helped to curb inflation, Giordani said.

Consumer prices rose 1.3 percent in September from August, according to the central bank’s benchmark Caracas price index published yesterday, lower than the 1.8 percent median forecast of seven economists surveyed by Bloomberg. Food prices fell 0.1 percent in September from a month earlier, down from a monthly increase of 12.5 percent in April.

Venezuela’s economy, the only one in Latin America still in recession, shrank a less-than-forecast 1.9 percent in the three months through June.

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