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UPDATE 2-Venezuela recession drags, GDP falls 5.8 pct Q1
May 25, 2010 / 10:21 PM / 8 years ago

UPDATE 2-Venezuela recession drags, GDP falls 5.8 pct Q1

* Oil GDP shrinks by 5.0 pct

* Non-oil GDP contracts by 4.9 pct

* Venezuela bucks recovery trend in Latin America

(adds details, figures)

CARACAS, May 20 (Reuters) - Venezuela’s economy is bucking the global recovery trend to remain stuck in recession, with a 5.8 percent contraction in the first quarter of 2010, the central bank said on Tuesday.

The South American OPEC member’s contraction in the first three months, compared with the same period of 2009, had been widely forecast by analysts who expect Venezuela to be the only nation in Latin America with negative growth in 2010.

The 5.8 percent decline was exactly the same as the fall in the first quarter of 2009.

Oil gross domestic product shrank 5.0 percent year-on-year in the first quarter, while non-oil GDP shrank 4.9 percent.

The central bank attributed the contraction principally to restricted access to foreign currency for imports, lower internal demand and electricity rationing.

Regarding the oil sector’s performance, in unusually blunt language, the bank said it was due to falls in production, “operative problems”, maintenance stoppages and the channeling of diesel to run thermal generators during a power crisis.

After 11 years in power, President Hugo Chavez blames Venezuela’s economic problems on a global crisis in capitalism and the impact of a traditional elite he says are bent on wrecking his model and driving him from power.

Critics, however, say his socialist policies -- including widespread nationalizations, currency controls and pressure on the private sector -- are ruining what should be one of Latin America’s richest nations, due to its oil wealth.

In the first quarter figures, the public sector fell 2.8 percent while the private sector tumbled a far more dramatic 6.0 percent, compared to the same period of 2009.

Chavez has already said another contraction this year -- after last year’s fall of 3.3 percent -- would not be a reason to worry, since it was caused partly by a drop in imports of non-essential items like new cars.

But the economic crisis, including runaway inflation, is starting to erode his traditionally high popularity levels, analysts say. Chavez faces a legislative election in September that is a precursor to a presidential vote in 2012.

By sector, transport suffered the biggest drop in the first quarter, contracting 15.9 percent, followed by trade with a decline of 11.6, manufacturing down 9.9, financial institutions down 9.7 and construction down 7.8. (Reporting by Enrique Pretel, Eyanir Chinea, Marianna Parraga and Patricia Rondon; Writing by Andrew Cawthorne and Daniel Wallis; Editing by Diane Craft)

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