For Immediate Release
Dan Beeton, 202-239-1460
NEW REPORT: Venezuelan Recession Likely Ended in Second Quarter
Future Growth Will Depend on Government Fiscal Policy, Public Investment
WASHINGTON - The Venezuelan
economy, which was in recession in 2009, likely began its recovery in
the second quarter of 2010, according to a new report
from Center for Economic and Policy Research.
The report finds that the Venezuelan economy grew at an annualized rate
of 5.2 percent in the second quarter, on a seasonally adjusted basis.
"The forecasts of most analysts for the Venezuelan economy have turned
out to be wrong again, as they were throughout most of the country's
prior economic expansion," said Mark
Weisbrot, Co-Director of the Center and lead author of the paper.
In June, Morgan Stanley predicted Venezuela's GDP would shrink by 6.2
percent in 2010 and 1.2 percent in 2011. The IMF projects that the
Venezuelan economy will contract by 2.6 percent for 2010 and grow by
less than 1.4 percent annually over the next five years - i.e. negative
per capita GDP growth. The IMF underestimated
Venezuela's economic growth by for the four consecutive years 2004,
2005, 2006, and 2007, by enormous margins: 10.6, 6.8, 5.4, and 4.7
percentage points, respectively.
The authors stress that economic growth in the foreseeable future will
depend on the government making and keeping a commitment to maintain
high levels of aggregate demand; and that it will also have to make
sure that adequate foreign exchange is supplied to producers for
imported inputs. If that is done, they argue, the expansion can
accelerate and be sustainable, despite high inflation or other current
The report notes that widespread predictions of rapidly accelerating
inflation after the January devaluation did not materialize, with
inflation over the last three months actually lower than it was before
"The government still has a relatively low public debt and is unlikely
to face foreign exchange constraints," said Weisbrot. "It is therefore
is in a position to stimulate economic growth as necessary through
public investment and spending."
The report notes that future economic growth is not guaranteed, but
will depend on the government's macroeconomic policies.
The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.