GDP grows 4.6 percent and shows slowdown in Venezuela

While the train of the Venezuelan economy keeps on going and accrues 20 quarters of growth, losing momentum is apparent. The Central Bank of Venezuela (BCV) recorded that in the third quarter of this current year, the Gross Domestic Product (GDP) heightened 4.6 percent, which translates into strong slowdown compared with 8.6 percent in the same term in 2007 and 10.2 percent in 2006. This happened even when the Venezuelan oil basket smashed record levels and averaged USD 112 a barrel.

The BCV failed to clarify the reasons for the slowdown, but noted that the growth "took place in an environment marked by shrinking trends in the world economy and strong financial uncertainty."

Generally, the non-oil sector of the economy moved up 4.5 percent versus 9.7 percent in the third quarter of 2007. For its part, the oil sector regained momentum and jumped 6 percent, leaving behind a decline of 4.4 percent during the same term last year. "Such a behavior is due to the sustained increase in crude oil output both by state-run oil company Petróleos de Venezuela (Pdvsa) and joint ventures, which translated into a rising volume of foreign sales," said the BCV.

A comprehensive exam
There has been a sudden braking on key areas for job creation. Manufacturing went from a hike of 7.6 percent in the third quarter of 2007 to only 0.3 percent; the rise shown by trade slumped from 18.8 percent to 2.3 percent. As a matter of fact, for the first time since 2003, transportation was in the red and sank 0.5 percent, leaving behind an ascent of 17.1 percent in the third quarter of 2007. Mining plunged 0.1 percent after having grown 0.9 percent in the third quarter last year and financial entities fell 2.7 percent, compared with a hike of 18 percent in 2007. The sectors that keep on going are: communication, which moved forward 19.7 percent versus 17.7 percent in the third quarter of 2007, and construction, which managed to advance 7.2 percent after jumping 5 percent last year. A look at the economy from the institutional standpoint shows that the private sector expanded 1.2 percent in the third quarter, as opposed to a climb of 5.3 percent during the same term last year. Concomitantly, the public sector expanded 12.5 percent; therefore, the growth rate of 13 percent in 2007 virtually remains unchanged.

Not so strong
"Such slowdown in the economy is not attributable to the global financial crisis, because in the third quarter of this year, Venezuelan oil prices went up, and the income for oil exports grew. The impact of the drop in oil prices will start to be felt in the fourth quarter," said José Guerra, ex manager of economic research at the BCV. "The growth of the economy became breathless due to the environment of disinvestment caused by price control, exchange control and also due to an overvalued local currency, which virtually has killed the industry," lamented the expert.