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The
government’s plan indicates that Chávez intends to maintain his
popularity via the public purse and to generate economic growth and
lowering unemployment in the short-term (unemployment reached 14.7% in
July).
Public spending this year will increase 65.3% in nominal terms
(45.5% in real) when compared to the 1999 budget, or by some US$ 8.9
billion.
The
public sector-led growth agenda is slated to continue next year according
to the draft budget introduced to Congress in early October. Key
assumptions underlying the government’s US$ 33.1 billion 2001 budget
proposal are: a US$ 20 per barrel oil price for the Venezuelan mix
of crude oils (up from US$ 15 this year), GDP growth of 4.5%, an average
exchange rate of 725 bolivares per US$, inflation at 11% and a fiscal
deficit target of 3.0% (up from 2.0% this year). Compared with the
original 2000 budget the government’s fiscal agenda for 2001 calls for a
nominal spending increase of 28.3%. Nevertheless, since the
government has undertaken several upward adjustments in the this year’s
budget, which has brought total spending to US$ 34.7 billion, the actual
budget for 2001 represents a 4.6% nominal spending cut (16.6% cut in real
terms).
Public
spending drives inflation.
In September consumer prices increased by 1.7%. The monthly increase
raises annual inflation to 15.9% in from 15.0% in August. Despite
the September spike in consumer prices, the Consensus figure continues to
converge with the government’s own 15% inflation target for this year as
panellists have again revised inflation forecast downward for this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here.
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