Devaluation absolutely denied: Planning & Development minister sees no slowdown in economy after BCV figures

Caracas Daily Journal (Jeremy Morgan): Planning & Development Minister Haiman El Troudi said the Bolívar Fuerte would "absolutely" not be devalued and that the government's system of price controls would remain in force to ensure sustained economic growth. The motives behind El Troudi's insistent devaluation denial remain unclear. Cynical observers tend to greet such denials as a sign that devaluation may be just around the corner. They say the chances of devaluation rise in line with the vehemence of denial.

Devaluation is a long-accepted recipe that's doled out when economies are deemed to be slowing down.

The problem with this is that devaluation can also fuel inflation since it boosts the local currency cost of imports -- and imports into Venezuela are steadily rising, not least to meet gaps in food supply. El Troudi's statements were the first detailed response from the government to the findings of the Venezuelan Central Bank (BCV) on the economy's performance during the first quarter of this year.

The report prompted pause for thought by revealing a slowdown in the rapid growth that had sparked warnings that the economy was in danger of over-heating. The upshot of this was that the economy might spiral into inflation and crash into the buffers.

Orthodox economists say most of the basics are there with one glaring exception -- the government's inability to throttle inflation. Inflation flattened last year's official target of 11 percent by hitting 22.5 percent -- and El Troudi's revised 2008 target of 19.5 percent is already deemed to be in danger. Consumer prices rose at an annual rate of almost 30 percent during the first four months of this year.

Skeptics suggest the figure would have been higher had it not been for the BCV tinkering with how it calculates the official index.

It was not just with devaluation that El Troudi was in denial. The BCV's estimate of 4.8 percent first quarter growth compared with 8.8 percent in the same period a year before was not a sign of deceleration in the economy, he claimed. Instead, he insisted that the figures showed that gross domestic product (GDP) had been in ascent for 18 quarters running. "The Venezuelan economy is well on the road of growth and development," he said.

Even economists critical of the government concede the economy still seems to be doing well. "At the end of the day, 4.8 percent GDP growth would be considered very good going anywhere else," said one analyst off the record. "The question is what happens next quarter and the one after that ... then we'll know whether the economy is heading back into recession, although there's no real reason why it should."

El Troudi has forecast GDP growth at between six and eight percent this year.