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The economy is experiencing a more broad-based recovery,
as the oil sector’s rebound is now being accompanied by pronounced growth
in domestic demand. Robust
growth rates, however, reflect a very weak comparison base last year, when
the economy entered deep recession following a nationwide strike that
practically erased two months from the national accounting books.
Sustainability of the current growth trajectory remains heavily
dependent on oil prices and a resolution to the current political and social
gridlock. |
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Economy
recovers amid high oil prices and rising domestic demand
While
official data for the first quarter have not yet been released, it is
evident that the economy has exited the recession of last year in the
first quarter, as recent indicators show that domestic demand is
undergoing a healthy recovery.
According to the Central Bank, national retail sales rose 26.2% in
February over the same month last year.
The February figure represented the third consecutive month of
robust double digit year-on-year growth but was well below the 41.3%
growth rate observed in January.
The strongest growth rates were observed in household goods and
supermarket sales, where activity was up 65.1% and 59.8% respectively over
the same month last year.
On the downside automotive vehicle, textiles and clothing as well
as pharmaceutical sales dropped over February last year.
The accelerating growth trend appears to have continued beyond the
end of the first quarter, since the Venezuelan Automobile Chamber (CAVENEZ,
Cámara
Automotriz de Venezuela) reports automobile sales rose 111.0% in April
over the same month last year, which was down from the 181.8% increase
observed in the previous month.
As with most other indicators, the growth rates reflect a very weak
comparison base last year, when the economy entered a severe economic
downturn due to a nationwide strike that wiped two months of economic
activity from the national accounting books.
Private
consumption benefits from lower unemployment and credit easing
Declining
unemployment, decelerating inflation and the easing of credit are key
factors behind the current recovery in private consumption.
According to the Superintendence of Banks and Other Financial
Institutions (SUDEBAN, Superintendencia
de Bancos y Otras Instituciones Financieras), consumer loans were up
15.4% in February over the same month last year.
The February figure was up from the already robust 12.0% growth
rate registered in January.
The most recent unemployment data from December last year indicate
that the jobless rate experienced a strong decline throughout the year to
reach 14.1% by year-end, which was down from 20.7% at the beginning of
2003.
Robust
manufacturing recovery underway
The
manufacturing industry is also experiencing a strong rebound.
In February, private manufacturing rose 33.4% over the same month
last year, which was down from a much more pronounced 90.7% expansion in
activity the prior month.
Virtually all sectors experienced double-digit growth over February
last year.
In particular, manufacturing output was bolstered by strong growth
in leather goods, wood products and automotive vehicles production.
Electrical equipment and machinery in addition to food beverage and
tobacco output actually declined over the previous year.
The decline in interest rates, improved credit conditions and a
gradual easing of exchange controls have helped bolster manufacturing
activity.
According to the Foreign
Currency Administration Commission (CADIVI, Comisión
de Administración de Divisas), the release of US$ 4.6 billion was
approved in the first quarter of the year, which was almost 50% of the
total for 2003.
Construction
sector activity reviving
The
construction sector has also exited recession.
According to the Central Bank, wholesale volume of construction
materials rose 55.1% in February over the same month last year.
The February figure was above the already robust 49.0% expansion
observed the prior month.
More recent data from the Venezuelan Cement Producers Association (AVPC,
Asociación
Venezolana de Productores de Cemento) confirms a robust expansion in
the construction industry, as cement sales for construction rose 59.9% in
the first quarter over the same quarter last year.
According to AVPC, the current expansion in the construction sector
is attributable to increased private sector activity, as government
infrastructure investment remains absent.
Oil
sector likely to provide additional growth impetus to non-oil economy’s
rebound
Oil
prices continue along a clear upward trend.
The price of the Venezuelan basket of crude oils reached US$ 31.21
per barrel at the end of April, which was the highest level observed since
November 2000 and was 35.9% above last year’s price.
In addition, the average price for the first four months of the
year of US$ 29.20 per barrel exceeded the government’s budgeted oil
price of US$ 18.50 per barrel for this year, which should provide
additional resources for increased public sector investment.
Rising uncertainty in the Middle East and declining inventories in
the United States have been key drivers behind the current rally in
international oil prices, which have remained well above the official OPEC
price band of US$ 22 to US$ 28 per barrel for several months.
The persistence of high oil prices has OPEC officials back peddling
on the recent 360,000 barrel per day (bpd) production cut adopted by OPEC
members on 1 April.
The 4% cutback in the quota to 23.5 million bpd could be reversed
in the 3 June meeting in Beirut, since member countries are increasingly
concerned that continued high prices could begin to threaten the global
economy.
An increase in the Venezuela production quota from the current 2.7
million bpd would further benefit the current rebound in the oil sector
and the overall economic recovery. |
