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Inflation moderating despite healthy economic activity but seen picking up
again next year amid faster currency depreciation.
June consumer price data indicate that the healthy economic conditions are
not putting additional upward pressure on prices. According to the
Central Bank, consumer prices increased 1.0% in June, which brought the
annual inflation rate down 0.1 percentage points from May to 12.5% in
June. Price increases in transport (+2.1%), housing (+1.6%) and
recreation (+1.6%) provided for the lion share of the June price
increase. Panellists do not expect the favourable inflationary
environment to continue and have maintained their year-end inflation
forecasts well above the Central Bank target of 11%. Next year, inflation
is likely to pick up as a result of accelerated currency depreciation.
The inflation forecast for 2002 was revised downward by 0.3 percentage
points to, which also still is well above the Central Banks inflation
target between 7 and 8%.
Fiscal accounts on target.
According to the most recent data, the central government’s fiscal deficit
reached 0.2% of GDP in the first quarter, down from 0.3% of GDP for the
same quarter last year. Fiscal revenues increased 9.8% over the same
quarter last year in nominal terms, driven by a 14.1% jump in oil-related
income and a 6.5% increase in non-oil related income. Key to the
improvement in fiscal balances were continued favourable oil prices and
increased value-added and income tax collection resulting from the pick-up
in economic activity. In late June, the government reported that the
annual fiscal deficit in the first half of this year was below 2.0% of
GDP, according to preliminary data, below the official target of 3.0% but
well above the 0.6% of GDP fiscal deficit in the same period last year.
Panellists expect the government to overshoot this year’s fiscal deficit
target. Furthermore, the fiscal balance is expected to deteriorate
further next year amid slower economic growth and moderating oil prices.
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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