Venezuela: GDP Up, Balance of Payments in the Red
By Jeffrey Snyder
Oxford 19.08.06 | Second quarter figures released earlier this week by the Banco Central de Venezuela show that GDP is up by 9.2%, with the non-oil sector growing by 9.9%. The Chavistas are rallying around the good news with uncritical enthusiasm, while opposition pundits cynically claim that the numbers can't be trusted or that the growth is spurred by shortsighted government investment initiatives which won't last because they are not market driven.
In reality, there is much to be positive about these latest figures (I see no reason to doubt the BCV) and I hope the trend continues, but all is not calm beneath the surface. There are significant macroeconomic reversals underway.
The balance of payment figures show that Venezuela's capital account, which measures the net change in foreign ownership of domestic assets, is at a record deficit of $9 billion. This means more investment is leaving the country than investment is coming into it from abroad by $9 billion. Matched with the current account surplus of only $8.3 billion (much of it from oil receipts), this means the central bank foreign reserves are in theory being drained by $0.7 billion to maintain the current forex fix. This is a significant reversal compared to 2005 which had net central bank reserve gains of $9.2 billion over the year.
This isn't always a bad thing, it can even be put down to seasonal fluctuations, but losing foreign reserves always seems to spell inflation.
[Statistics Source: http://www.bcv.org.ve]
Source Venezuelan News Analysis
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