Growth recovery uneven.  While growth has remained below optimal levels this year, particularly given current high oil prices, GDP figures in the first (+0.3%) and second (+2.6%) quarters indicate that the economy is gradually recovering from last year’s recession.  Nevertheless, more recent data presents a mixed picture.  In May and June, private manufacturing industry showed clear signs of a sound recovery with year-over-year growth rates reaching 10.4% and 8.8% respectively.  However, July data showed a notable slowdown with year-over-year growth reaching just 1.6%.  Consumer goods industries of clothing/leather goods and wood/furniture production both registered strong growth of 25.8% and 43.1% respectively along with the basic metals industry production (aluminium and steel), which expanded 25.9% over the same month last year.  On the downside, food, beverages and tobacco production dropped 5.3%, while chemical, petroleum derivatives, plastics and rubber output showed timid growth of 0.8%.

While the scale of industrial recovery remains uncertain, consumption is clearly on the rebound.  In July, retail sales were up 26.6% over the same month last year.  Both the automotive and home appliance sector continued to display the strongest growth rates expanding 41.4% and 45.9% respectively.

Given the Central Bank’s sentiment that economic activity is recovering, monetary authorities believe that growth of 2.2% is likely to be exceeded this year.  Consensus Forecast results display an even more optimistic outlook for this year.  According to the government, the pick-up in domestic economic activity next year is expected to generate GDP growth of 4.4%, on target with this month’s Consensus Forecast result.

Government defines public sector plans for 2000 and 2001.  In September, the Chávez administration announced its intention to provide for a short-term push via a US$ 2 billion public spending programme.  The government intends to finance the bulk of the public spending initiative with funds provided by Central Bank income on foreign currency reserves.  Spending will be targeted in five key areas:

-  Infrastructure.  Approximately 39% of the programmes resources (US$ 798 million) will flow to infrastructure development projects, including the reconstruction of areas destroyed by last year’s floods and the building of 20,000 new homes.

-  Productive Activities.  Key economic sectors targeted by government subsidies will be agriculture (US$ 131 million), industry (US$ 89.4 million) and tourism (US$ 27.5 million).

-  Technology.  The administration plans to invest US$ 138 million in technological research and development.

-  Security.  The national security plan, which will require US$ 83 million dollars, calls for the creation of 100,000 new jobs through the establishment of civic-military battalions to be trained in security and national defence in coordination with the military and the National Employment Institute (INCE).

-  Social.  The government will use 37% of total funds (US$ 743 million) to finance social development projects such as building technical schools, small clinics, extending maternal health services and extending popular kitchens nationwide.

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