Venezuelan GDP growth slows in third quarter: Output still rose, but rate of expansion decelerated

Caracas Daily Journal (Jeremy Morgan): Stop worrying about the economic outlook next year, and concern yourself about this one. Confirmation that the economy was decelerating before oil prices dropped through the floor has come with figures from the Venezuelan Central Bank (BCV).

Gross domestic product (GDP) still expanded during the third quarter compared with a year before, by 4.6 percent. But that was barely half the 8.6 percent rise seen in the third quarter of last year, and it was the smallest increase seen in any quarter during the last five years.

Government officials stressed that the economy had grown for 20 consecutive quarters. But the fact that the economy slowed down was emphasized by figures showing growth averaged an annual 6.1 percent during the first half of the year, and 5.6 percent during the first three quarters.

The economy was all but finished with the third quarter when investment bankers Lehman Brothers went to the wall in mid-September, sparking a global financial hurricane whose end is by no means anywhere in sight.

• In effect, the third quarter figures reflect what was going on in the pre-crisis economy and – most important of all for Venezuela – don't include the sharp drop in oil prices in the wake of the upheaval.

Oil GDP rose in the third quarter by six percent on the same period a year earlier, when it contracted by 4.4 percent. Oil did well during the first nine months of this year, rising 4.1 percent for the largest such increase recorded since 2004. In contrast, the non-oil economy was already slowing down by the third quarter, with growth of 4.5 percent compared with 9.7 percent in the same of 2007.

There was bad news in the third quarter from the manufacturing front, with output rising by just 0.3 percent, so small it barely counts, against a healthy 7.6 percent expansion in the third quarter of 2007. Similarly, third quarter growth in the commerce sector slid from 18.8 percent last year to a meager 2.3 percent this time round.

The financial sector was squeezed, with third quarter output actually falling by 2.7 percent after cruising to an 18 percent increase a year before. Mining, a sector that promises a lot but doesn't get much attention, slipped by 0.1 percent after slumbering through a 0.9 percent upturn in the third quarter of last year. The one sector that did well was communications, which charged ahead with a 19.7 percent third quarter increase that was even better than the 17.7 percent rise recorded last time.

Curiously, economic deceleration does not appear to have reached the construction industry, usually one of the first sectors to respond to and reflect the ups and downs of an economy, by the third quarter of this year. Activity at building sites was still 7.3 percent higher than a year before, when there was a five percent increase.

Perhaps construction companies decided to plough ahead and get projects finally finished. But the evidence of one's eyes suggests that the pace of work at some sites has slowed in recent weeks, and in some cases appears to have stopped altogether.