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Venezuela: inflation could top 1 million percent by year's end, IMF warns | Venezuela: inflation could top 1 million percent by year's end, IMF warns |
(5 months later) | |
Inflation in Venezuela could top 1 million percent by year’s end as the country’s historic crisis deepens, the International Monetary Fund said on Monday. | Inflation in Venezuela could top 1 million percent by year’s end as the country’s historic crisis deepens, the International Monetary Fund said on Monday. |
Venezuela’s economic turmoil compares to Germany’s after the first world war and Zimbabwe’s at the beginning of the last decade, said Alejandro Werner, head of the IMF’s western hemisphere department. | Venezuela’s economic turmoil compares to Germany’s after the first world war and Zimbabwe’s at the beginning of the last decade, said Alejandro Werner, head of the IMF’s western hemisphere department. |
“The collapse in economic activity, hyperinflation, and increasing deterioration … will lead to intensifying spillover effects on neighboring countries,” Werner wrote in a blogpost. | “The collapse in economic activity, hyperinflation, and increasing deterioration … will lead to intensifying spillover effects on neighboring countries,” Werner wrote in a blogpost. |
Venezuela, a once wealthy oil-producing nation, is in the grips of a five-year crisis that has left many of its people struggling to find food and medicine, while driving masses across the border for relief into neighboring Colombia and Brazil. | Venezuela, a once wealthy oil-producing nation, is in the grips of a five-year crisis that has left many of its people struggling to find food and medicine, while driving masses across the border for relief into neighboring Colombia and Brazil. |
Shortages in electricity, domestic water and public transportation plague millions of Venezuelans, who also confront high crime, the IMF noted. | Shortages in electricity, domestic water and public transportation plague millions of Venezuelans, who also confront high crime, the IMF noted. |
Under the late Hugo Chávez, who ushered in Venezuela’s socialist revolution in 1999, a new constitution and numerous elections placed nearly all government institutions under the control of the ruling Socialist party. | Under the late Hugo Chávez, who ushered in Venezuela’s socialist revolution in 1999, a new constitution and numerous elections placed nearly all government institutions under the control of the ruling Socialist party. |
This concentration of power was aided by a feuding opposition which carried out ineffectual campaigns and electoral boycotts. After Chávez died of cancer in 2013, he was succeeded by Nicolás Maduro who is even less tolerant of dissent. | This concentration of power was aided by a feuding opposition which carried out ineffectual campaigns and electoral boycotts. After Chávez died of cancer in 2013, he was succeeded by Nicolás Maduro who is even less tolerant of dissent. |
Growing political authoritarianism has coincided with greater state dominance over the economy. But expropriations, price controls and mismanagement have led to a 40% contraction of the economy in the past five years. | Growing political authoritarianism has coincided with greater state dominance over the economy. But expropriations, price controls and mismanagement have led to a 40% contraction of the economy in the past five years. |
Oil accounts for 96% of Venezuela’s export income but many foreign companies have been driven out and production has dropped to a 30-year low. | Oil accounts for 96% of Venezuela’s export income but many foreign companies have been driven out and production has dropped to a 30-year low. |
The resulting fiscal crisis has prompted the government to print more money, which has led to hyperinflation and a collapse of the currency. | The resulting fiscal crisis has prompted the government to print more money, which has led to hyperinflation and a collapse of the currency. |
It also means that the government can’t import enough food and medicine to meet demand. | It also means that the government can’t import enough food and medicine to meet demand. |
Maduro has rejected economic reforms out of loyalty to socialism and because many government officials are allegedly getting rich off the economic distortions – through exchange rate scams and by selling scarce food on the black market. | Maduro has rejected economic reforms out of loyalty to socialism and because many government officials are allegedly getting rich off the economic distortions – through exchange rate scams and by selling scarce food on the black market. |
If the prediction holds, Venezuela’s economy will have contracted 50% over the last five years, Werner said, adding that it would be among the world’s deepest economic falls in six decades. | If the prediction holds, Venezuela’s economy will have contracted 50% over the last five years, Werner said, adding that it would be among the world’s deepest economic falls in six decades. |
President Nicolás Maduro has blamed Venezuela’s poor economy on an economic war he says is being waged by the United States and Europe. | President Nicolás Maduro has blamed Venezuela’s poor economy on an economic war he says is being waged by the United States and Europe. |
Maduro won a second six-year term as president despite the deep economic and political problems in a May election that his leading challenger and many countries do not recognize as legitimate. | Maduro won a second six-year term as president despite the deep economic and political problems in a May election that his leading challenger and many countries do not recognize as legitimate. |
Hunger Highway: desperate Venezuelans take hard road to Brazil | |
The IMF estimates Venezuela’s economy could contract 18% this year, up from the 15% drop it predicted in April. This will be the third consecutive year of double-digit decline, the IMF said. | The IMF estimates Venezuela’s economy could contract 18% this year, up from the 15% drop it predicted in April. This will be the third consecutive year of double-digit decline, the IMF said. |
Werner said the projections are based on calculations prepared by IMF staff, but he warned that they have a degree of uncertainty greater than in other countries. | Werner said the projections are based on calculations prepared by IMF staff, but he warned that they have a degree of uncertainty greater than in other countries. |
“An economy throwing you these numbers is very difficult to project,” Werner said at a news conference. “Any changes between now and December may include significant changes.” | “An economy throwing you these numbers is very difficult to project,” Werner said at a news conference. “Any changes between now and December may include significant changes.” |
Venezuela | Venezuela |
International Monetary Fund (IMF) | International Monetary Fund (IMF) |
Inflation | Inflation |
Economics | Economics |
Americas | Americas |
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