Venezuela’s economy grew 5.5 percent this year as a government spending spree ahead of elections in October led to a construction boom, according to central bank estimates.
Construction grew 16.8 percent and government services expanded 5.2 percent, central bank President Nelson Merentes said, citing preliminary figures. Official gross domestic product data will be released in late February.
“Basically, the public sector is promoting growth through spending and investment, obvious because of the construction sector’s performance,” Asdrubal Oliveros, director of Caracas-based financial consulting firm Ecoanalitica, said in a phone interview. “This was a presidential election year and, of course, the government was going to inject spending into the economy.”
President Hugo Chavez raised spending on low-income housing and wages before the Oct. 7 vote, widening the fiscal deficit to about 8.8 percent of GDP this year, according to calculations by Bank of America Corp.
Non-oil sector GDP rose 5.7 percent this year, while the oil industry expanded 1.4 percent, the central bank said. Commerce grew 9.2 percent, communications 7.2 percent, transportation and storage 5.3 percent, and manufacturing 2.1 percent.
“The private sector represented a greater percentage of growth than its size in the economy, and the same goes for the non-oil sector,” Finance Minister Jorge Giordani said today on state television. “We’re seeing the reactivation of the Venezuelan economy.”
Venezuela, South America’s largest oil producer and a founding member of OPEC, grew 4.2 percent in 2011 after contracting 3.3 percent in 2009 and 1.4 percent in 2010.
Merentes declined to comment on future economic measures including any changes to the country’s currency controls.
Following the Oct. 7 election, government spending probably fell about 11.2 percent in the fourth quarter from the year earlier, Mercantil Banco Universal said yesterday in a report sent by e-mail.
Spending this year has been buoyed by an average oil export price of $103.54 a barrel, according to the Oil Ministry’s website.
The government’s victory in gubernatorial elections on Dec. 16 has increased the chances that it will devalue the bolivar “sooner rather than later,” Barclays Plc analysts Alejandro Arreaza and Alejandro Grisanti said in an e-mailed note to clients yesterday.
“The government may be willing to absorb the political cost of a devaluation now and avoid having to do it at the beginning of a possible new administration,” Arreaza and Grisanti said.
Chavez, 58, is in Cuba recovering from a fourth operation in 18 months to treat an undisclosed cancer, spurring doubts he will be able to continue as the country’s president. He is scheduled to be sworn in Jan. 10 for his third, six-year term.
Fiscal spending has been financed in part by development loans of at least $12.5 billion in the past year from China Development Bank.
With at least $42.5 billion in loans since 2007, Venezuela has become the biggest recipient of Chinese credit in the region as the nationalization of more than 1,000 companies and currency and price controls drive away other lenders.
Venezuela will maintain its preference for issuing local debt over foreign debt next year, Giordani said in an interview on the sidelines of today’s press conference.
“In 2012, the debt that increased was local debt,” Giordani said. “We are going to maintain that policy next year.”