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Growth slows due to oil but remains
relatively strong
In his 30 December announcement, the Central
Bank reported that Gross Domestic Product (GDP) grew 2.7% in 2001, which
was one of the highest rates in Latin America last year and came in 0.2
percentage points below the Consensus figure last month. Last year’s
growth figure was below the 3.2% registered in 2000, as economic activity
growth boosted by the strong 3.8% expansion in the non-oil sector, since
activity in the oil sector dropped 0.9% amidst lower production and
prices. The oil sector sector downturn reflected Venezuelan cuts in its
output three times last year. Venezuela agreed to scale back production
by a total of 406,000 barrels per day (bpd) to a 2.67 million bpd
production level. In addition, oil prices dropped significantly following
the 11 September attacks, which put further pressure on performance of the
oil sector. In 2001, the price for the Venezuelan basket of crude oils
averaged US$ 20.34 per barrel, which was down from US$ 25.91 in 2000.
Leading the non-oil sector expansion was 13.0%
growth in the construction industry, as the government stepped up spending
on infrastructure and housing throughout the year. Similarly, healthy
growth was registered in the transport, storage and communications
sectors, followed by commerce and manufacturing, all of which grew 8.1%
4.2% and 3.2% respectively. The only sector to experience lower growth
was the finance and insurance, where growth rose just 1.5% in 2001.
Aggregate demand and supply data show that
consumption rose 4.9% in 2001, up from 3.9% growth in 2000. Driving the
consumption expansion was 5.9% growth in public consumption, while private
consumption increased 4.7%. Gross fixed investment (including changes in
stocks of inventory) rose 12.0%, up from just 1.0% in 2000.
Persistence of oil price decline
could prompt economic decline
The prospects for acceleration in the pace of
economic growth this year are not promising. The downward trend in oil
prices has not abated. Even though oil prices have shown some recovery in
the beginning of the year, prices remain below the government’s US$ 18 oil
price per barrel budgetary assumption for 2000. On 11 January, the price
on the Venezuelan basket of crude oil closed at US$ 17.23 per barrel. The
slump in global oil prices prompted OPEC to implement another 1.5 million
bpd production cut starting 1 January 2002, following the decision of
non-OPEC producing countries Angola, Mexico, Norway, Oman and the Russian
Federation to cut back output by a total 462,500 bpd. Consensus Forecast
participants expect the oil price to recover moderately but to remain
below the government’s budgeted oil price level, which is likely to prompt
officials to draw down on the funds in the Investment Fund for
Macroeconomic Stabilization (FIEM) rather than implement adjustments to
the budget, particularly when the need for increased spending is running
high given the continued deterioration in the President’s popularity and
rising political tensions.
The need for production cutbacks is likely to
put further downside pressure on the oil sector, which accounted for 26.4%
of GDP in 2001. The drop in economic activity within the oil sector is
likely to spill over to the non-oil sector of the economy and will be
reflected in national accounts, as panellists now expect the economy to
grow just 1.3%, which is down 0.7 percent from last month. This year’s
growth forecast stands in stark contrast to the government’s 4.1% budget
estimate.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here. |
