On May 31, the Venezuelan Central Bank announced that Venezuela’s economy grew by .07 percent in the first quarter of the year. This news illustrates the grim economic reality of the country, an enormous challenge for President Nicolas Maduro. The economic data displays a country that is in dire need of reform.
The dismal economic growth means that the current deficit, forecasted to be near 20 percent, will not decrease. However, the IMF projects a sharp increase in Venezuela’s deficit.
Inflation reached roughly 30 percent last month, with consumer prices having risen 4.3 percent in April. The IMF forecasts that inflation will continue to rise. With high inflation, the scarcity index also increased, hitting 21 percent in April. In other words, 21 out of 100 goods are unavailable, a topic that has already been well documented by the media.
To make up for the shortage, Venezuela has increased its imports, which are largely made up of manufacturing (81 percent), transportation services (34 percent), and food (14 percent).
To fight off inflation, the government recently raised the minimum wage to Bolivares 2,457 ($390), a 20 percent increase from last year. This will be followed by a 10 percent raise in September and the possibility of another 5 to 10 percent increase in November. This salary increase further adds to the growing deficit.
Venezuela depends heavily on oil, which makes up 96 percent of exports, while manufactured goods trail behind at 2.4 percent. Although the recent devaluation of the Bolivar will help the government gain more money out of oil exports, production has drastically decreased. The EIA calculates that PDVSA produced 2,489 thousand barrels per day (mb/d) last year from 2,720 mb/d in 2011, roughly an 8.5 percent decrease. This follows the same trend from 2011, which saw a 2 percent decrease from 2010.
Finally, crime continues to rise, with the homicide rate having tripled between 1998 and 2009. Homicide rates reached 45 percent in 2010, ahead of Colombia (33 percent) and Mexico (22 percent).
These figures present a country in dire need of reform. Furthermore, the conditions of the economy are a challenge for President Maduro, who has lost public support. Two recent polls show that fifty percent of respondents blame the government for the country’s problems and around forty percent rate Maduro’s first month in office as “bad” or “really bad.” The same polls also show that if the presidential election were held again, Henrique Capriles would win with a comfortable margin.