By Brian Ellsworth and Eyanir Chinea
CARACAS Aug 22 Venezuela's economy rebounded in the second quarter from tepid growth in the previous three months, the central bank said on Thursday, but growth was still far below the expansion of the same period in 2012 due to slower government spending.
The figures are good news for President Nicolas Maduro, who has faced a number of economic problems since his election in April, including annualized inflation rising to 43 percent and annoying shortages of consumer goods.
Government officials said growth of 2.6 percent compared with the same period last year was evidence that the country's economy was on solid ground after lackluster growth of 0.5 percent in the first quarter.
"For those who insisted that we were going to enter a period of contraction, the reality is showing the opposite," Finance Minister Nelson Merentes told a news conference.
Bright spots included 24.3 percent growth in the financial sector, 5.7 percent in manufacturing, which shrank in the first quarter, and 6.7 percent growth in communications.
But the construction sector, spurred last year by a massive homebuilding program that helped late socialist leader Hugo Chavez win re-election, shrank by 6 percent, while activity in the mining sector contracted a whopping 22 percent.
As a result, growth in gross domestic product in the second quarter GDP fell far short of the 5.6 percent seen in the second quarter of 2012.
Maduro's government has targeted 6 percent growth in GDP this year and a 15 percent increase inflation. Merentes said those figures will be updated in the coming weeks when the government presents its 2014 budget to Congress.
The economy has been hampered this year as heavy social spending in 2012 has given way to a steep drop-off in state outlays under Maduro.
A slowdown in the ambitious home-building program, which put hundreds of thousands of families in new apartments and helped Chavez win re-election five months before his death from cancer, has been a key factor in the construction sector slowdown.
Critics say the effort provided an unsustainable stimulus to the economy. They also say the rapid expansion of the banking sector is driven by heavy government issue of bonds, rather than by productivity growth.
Though Thursday's figures showed a notable expansion in the manufacture of food, consumers complain regularly they cannot find products, including wheat flour and corn flour, and the central bank's scarcity index remains near historic highs.
Chavez's model of using abundant oil revenue to fund popular social programs and expand state control over the economy helped him repeatedly win elections and turned him into a symbol of the resurgence of Latin America's left.
But Venezuela's private sector weakened during his 14-year rule in a steady drumbeat of nationalizations and state takeovers that left many business leaders unwilling to invest in expanding or maintaining operations.
Chavez's model of socialism relied on constantly rising oil prices to finance a growing import bill.
Even with the price of crude above $100 per barrel, the government relied heavily on expansion of the money supply to maintain social spending. Monetary liquidity has risen 39 percent in the last 12 months, according to the central bank.