Andrew Rosati writes at Bloomberg Business
Venezuela, which already has the world’s fastest inflation rate at a reported 69 percent in December, could see that rate more than double this year as it struggles to respond to falling oil prices.and
“We may end up this year with inflation at close to 200 percent,” Alberto Ades, co-head of global economics research at Bank of America, said in an interview on Bloomberg Surveillance Friday.
Annual inflation could rise to as much as 150 percent in 2015, and climb as high as 250 percent if the Central Bank included factors currently being omitted in the official statistics, he said.But interestingly the inflation numbers have not been released so far this year.
The central bank, which typically releases inflation data each month, has yet to publish any information for this year.Not releasing the numbers is not a good look. It does suggest that they are bad and the government doesn't want people to know just how bad.
“It’s a strictly a political decision,” Asdrubal Oliveros, director of the Caracas-based consultant Ecoanalitica, said Friday in an interview, referring to the data delays. “It’s not like they’ve stopped calculating inflation. The director of the Central Bank knows what the rate is.”
Part of the problem is that Venezuela relies on oil for the vast majority of its foreign-exchange earnings and the price of oil is dropping. Its almost half of what it was last year.
Venezuela has received an average $45.21 a barrel for its exports so far this year compared with $88.42 in 2014, according to the oil ministry. The nation relies on oil for about 95 percent of its foreign-currency earnings.Loss of foreign exchange means that imports have to be cut.
Venezuela has responded to falling oil prices by reducing imports, which dropped 18 percent in January compared with the same month last year, BofA Merrill Lynch Global Research said in a report on April 7.and the economy is suffering,
“The Maduro administration is in the midst of undertaking one of the largest import adjustments in Venezuelan history,” the bank said, adding that many of the country’s economic problems are “to a large extent self-inflicted.”
He [Alberto Ades] forecast the economy would shrink 4 percent. “Venezuela is in a dire crisis.”Are we watching an economy implode simply because of its government's policies?
The 50 percent drop in oil prices in the past year has buffeted Venezuela’s economy and forced it to reduce imports, exacerbating shortages of everything from shampoo to beef. On the black market, the bolivar has weakened 74 percent in the past year to about 257 bolivars per dollar, compared with the official rate of 6.3 for priority imports.