CARACAS.- Venezuela closed 2023 with a inflation of 193%, a decrease from 305% in 2022, although still the highest in the world, while the structural problems of the economywhich makes it extremely difficult to produce a prompt recovery after the collapse that occurred between 2013 and 2019.
The rate of inflation December 2023 stood at 3.9%, above the 1.9% in November, but well below the 37.2% in December 2022. This means that, although the pace of price increases accelerated in December 2023, the The result in annualized terms was a lower inflation rate, reported the Venezuelan Finance Observatory (OVF), an independent entity that keeps track of prices in the Caribbean country in the absence of official data.
However, experts in the economic area highlight that the slowdown in prices, which reached hyperinflationary figures between 2017 and 2020, has been done at a very high cost, with very negative consequences for growth.
Venezuela: economy in crisis
In 2023, the Central Bank of Venezuela (BCV) intervened more actively in the exchange market to stop the depreciation of the bolivar. As a result, the price of the dollar increased 106% in 2023, compared to 281% in 2022.
The supply of dollars in the official market, through the BCV, and as a result of the reactivation of the operations of the oil company Chevron in the country, had an increase of 10% compared to 2022, according to data from the consulting firm Síntesis Financiera. cited in managersis.com. In this way, the price of the dollar was more stable than in 2022.
Other factors that influenced the lower price increase is the strategy applied by the regime to cut the circulation of bolivars, through credit restriction and lower public spending.
“The absence of credit in any form, with a credit portfolio of barely 1.5% of GDP, in contrast to the regional average of between 40 and 50 points of GDP. In addition, current credit barely covers 15% of primary needs of the private company, and it is very expensive by international standards,” said economists Asdrúbal Oliveros and Jesús Palacios Chacín, partners of the firm Ecoanalítico, in the article “From euphoria to the brakes”, published by the SIC magazine of the Gumilla Center.
One of the consequences of the credit brake is the drop in consumption and limitations in the production of companies, which are tied to their cash flow. At the same time, the cut in public spending is reflected in low salaries and pensions, and no investment in public projects.
“Think about sustained growth in an economy that operates with such low productivity conditions due to important supply restrictions such as failures in public services, the absolute scarcity of credit, and the isolation of international markets that make a substantial recovery of the economy difficult. oil industry, it seems like a quite complicated mission,” said Oliveros and Palacios.
In his opinion, the supposed “recovery” that the Venezuelan economy had in 2022 was an “illusory effect” caused by an “inertial rebound” product of four years of de facto dollarization and the end of the pandemic. They highlight that the economic boom had certain characteristics: it was concentrated only in Caracas, the capital, and two of the country’s main cities: Valencia and Maracaibo; and covered only the commercial sector.
“Inflation has subsided due to an undecreed economic adjustment that has had a devastating effect,” said Leonardo Vera, professor at the Central University of Venezuela (UCV) and member of the Venezuelan Academy of Economics, in a article from elpais.com.
And he added: “the three pillars of its deceleration have been the wage freeze; the legal reserve requirement that has cut off bank credit; and the attempt to anchor the exchange rate, which has made imports cheaper and domestic products more expensive.”
Source: WRITING
