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Venezuela Inflation Seen Pushing 200% as Rationing Deepens

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Venezuela, which already has the world’s fastest inflation rate at a reported 69 percent in December, could see that rate more than double this year as it struggles to respond to falling oil prices.

“We may end up this year with inflation at close to 200 percent,” Alberto Ades, co-head of global economics research at Bank of America, said in an interview on Bloomberg Surveillance Friday. He forecast the economy would shrink 4 percent. “Venezuela is in a dire crisis.”

The 50 percent drop in oil prices in the past year has buffeted Venezuela’s economy and forced it to reduce imports, exacerbating shortages of everything from shampoo to beef. On the black market, the bolivar has weakened 74 percent in the past year to about 257 bolivars per dollar, compared with the official rate of 6.3 for priority imports.

The central bank, which typically releases inflation data each month, has yet to publish any information for this year.

‘Political Decision’

“It’s a strictly a political decision,” Asdrubal Oliveros, director of the Caracas-based consultant Ecoanalitica, said Friday in an interview, referring to the data delays. “It’s not like they’ve stopped calculating inflation. The director of the Central Bank knows what the rate is.”

Annual inflation could rise to as much as 150 percent in 2015, and climb as high as 250 percent if the Central Bank included factors currently being omitted in the official statistics, he said.

“It’s not that they are manipulating the numbers, it’s that they’re omitting certain factors that Central Bank should include,” Oliveros said.

Imports Fall

Venezuela has responded to falling oil prices by reducing imports, which dropped 18 percent in January compared with the same month last year, BofA Merrill Lynch Global Research said in a report on April 7.

“The Maduro administration is in the midst of undertaking one of the largest import adjustments in Venezuelan history,” the bank said, adding that many of the country’s economic problems are “to a large extent self-inflicted.”

Venezuela has received an average $45.21 a barrel for its exports so far this year compared with $88.42 in 2014, according to the oil ministry. The nation relies on oil for about 95 percent of its foreign-currency earnings.

Foreign reserves have fallen 15 percent in the past six weeks to $20.6 billion from a 2015 high of $24.2 billion in February, according to data compiled by Bloomberg.

“They still have assets to continue to pay their debt, but if you look at the first quarter, they are drawing down their assets very, very quickly,” BofA’s Ades said.

(Updates with analyst comment starting in 5th paragraph.)
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