CARACAS, (Reuters) – Venezuela’s socialist government decreed an “economic emergency” yesterday and published the first data in a year showing the depth of a recession fueled by low oil prices and a sputtering state-led model.
The central bank, which has been lambasted by critics of President Nicolas Maduro’s government for hiding statistics since the end of 2014, said the South American OPEC nation’s economy shrank 4.5 percent in the first nine months last year.
Inflation soared in that period to an annual rate of 141.5 percent: the world’s worst.
Venezuela’s oil-dependent economy is again forecast to perform abysmally in 2016. Maduro lost control of the National Assembly in a December election due to voter ire over the crisis.
The government’s decree, which the opposition-led assembly says it has the power to approve or reject, sets a 60-day “economic emergency” and would give Maduro wider powers to intervene in companies or limit access to currency.
It did not mention any possible policy changes such as a rumoured currency devaluation or hike in the price of heavily-subsidized fuel.
“We want to reaffirm the trust of the Venezuelan people in the revolution,” said new economy vice president Luis Salas, a 39-year-old sociologist who has raised eyebrows with unorthodox views, like saying inflation does not really exist.
Maduro was to give a state-of-the-nation address later yesterday. The former bus driver and foreign minister won election to replace Hugo Chavez in 2013, and has stuck to his mentor’s policies of strict currency and price controls.
With massive shopping lines in Venezuela and widespread shortages of basics from milk to medicines, the government faces mounting pressure to change what critics call a failed model.
Bank of America predicted yesterday Maduro would merge Venezuela’s three-tier currency controls into two, replacing the strongest rate of 6.3 bolivars to the dollar with a level of 35.
Greenbacks go for around 865 bolivars on the black market.
Bank of America also forecast Maduro would raise the price of the world’s cheapest gasoline: a large tank can be filled for one U.S. cent at the black market rate. It said he may also consider a debt moratorium or restructuring.
Venezuela depends on oil for about 96 percent of hard currency revenues. The average price for its basket of oil and refined products fell this week to $24.38, its lowest in more than 12 years.
“The biggest loser in Latin America of the decline in oil prices is clearly Venezuela. At this point, a credit event in 2016 seems difficult to avoid,” Barclays said in a research note.
It foresaw a government financing gap of nearly $30 billion in 2016, for which it could receive $6.7 billion in financing and would need to find $22.7 billion from its assets.
“This would push assets below what we consider minimum operational levels,” Barclays said.
The heaviest payments in Venezuela’s roughly $10 billion foreign debt bill for 2016 come in October and November.
The government blames its woes on the global oil scenario and sabotage of the economy by its foes.
“Venezuela is suffering a new generation economic war promoted by web pages which fix the bolivar-dollar relation without any criteria or economic substance,” the central bank complained, referring to the Dolar Today website that publishes a black market currency price to the fury of the government.
The opposition coalition says policy incompetence is responsible for Venezuela’s economic mess.
It has said it wants to find a constitutional way this year to remove Maduro.
“An emergency economic degree without clear objectives … is only going to worsen the situation,” tweeted local economist Luis Oliveros, a frequent government critic.
According to the central bank, Venezuela’s current account deficit was $5.05 billion in the third quarter, hurt by the tumble in prices for its main export.
