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Recovery
this year but likely below potential
The
strong 29.8% rebound in the first quarter is unlikely to be repeated in
the second.
Nevertheless, recovery is likely to have proceeded along a robust
expansion path.
Consensus Forecast participants see gross domestic product (GDP)
expanding 7.6% in the second quarter over the same quarter last year.
The moderation from the booming growth rate in the first quarter
reflects gradual fading of the weak comparison base last year, when the
economy was easing out of a standstill in economic activity provoked by
the two-month nationwide strike in December 2002/January 2003.
Economic growth is seen to moderate at a more pronounced pace in
the second half of the year, as economic activity decelerates to 3.0% and
1.5% respectively in the third and fourth quarter.
As a result, full-year growth will reach 8.3%, which is up 0.3
percentage points from last month’s forecast.
Next year, economic activity will slow further, as GDP expands just
3.5%.
Recall
referendum approved by electoral
authorities
Venezuelans
are scheduled to go to the polls on 15 August to decide on the recall of
President Chávez from office.
On 3 June, the National Electoral Council (CNE, Consejo
Nacional Electoral) decided to confirm the validity of the
opposition’s signature drive to call for the referendum and thus paved
the way for the August poll.
Although initially adverse to the CNE decision, the government has
decided to let the referendum proceed, opting instead to win over voters
through campaigning.
The government is confident that the referendum will fail and will
reveal the lack of popular support for the opposition.
The confidence is boosted further by the fact that the constitution
stipulates that the president can only be recalled if the popular vote
exceeds the number of votes received by the president in the prior
election (3.76 million in the case of Chávez).
The most recent Datanalisis poll conducted in May shows that 57.4%
of the electorate would vote to recall the president, while 42.6% would
prefer to have him stay in office.
The May poll shows that the president has gained 1.6 percentage
points over a similar March survey.
Furthermore, when compared to May last year, the president has
raised his support by 6.6 percentage points.
The government will be aided by the improved economic setting and
increased government spending.
Chávez is estimated to enjoy the firm support of 30% to 40% of the
electorate so the opposition will have to rely on an equally committed
support base and will have to work vigorously to ensure that abstention
(in prior elections around 40%) is kept to a minimum.
Furthermore, current law stipulates that a successful recall
requires new elections 30 days after the referendum.
The opposition is still concerned about governmental legal
challenges post-referendum to avert new elections.
In addition, recalling the president would only require new
elections to take place but ambiguity in the constitution could enable Chávez
to run for the presidency again.
Political uncertainty, therefore, appears to be on the slate for
some time to come and as a result the economy is likely to grow below
potential. |
