Rare data release from Maduro’s government, reportedly prompted by China, offers a new look at the country’s collapse.
The International Monetary Fund (IMF) admitted Thursday that it had not pressured Venezuela to release economic indicators after years of silence.
Reuters reported that two of its sources said the surprise publication of the data this week was due to pressure from China.
One source said China had hoped that releasing the numbers would help bring Venezuela into compliance with the IMF, making it harder for the institution to recognize opposition leader Juan Guaido, reported Reuters.
Venezuela’s official data
The central bank of Venezuela this week released dire economic data showing runaway inflation, plummeting oil income and catastrophic declines in the South American country’s gross domestic product (GDP).
The official figures – published on Tuesday by the central bank in Caracas – show a severe contraction of 22.5 percent in third-quarter 2018 GDP. That marks the 19th consecutive quarter the economy has shrunk.
The government of President Nicolas Maduro had last published economic data in 2015, as the decline in global oil prices began to hit Venezuela’s socialist economy.
The central bank said monthly inflation for April 2019 was 33.8 percent, down from 197 percent in January and an apparent improvement over the 130,060 percent hyperinflation seen in 2018.
But oil earnings – which make up more than 95 percent of export revenues in Venezuela – declined to $29.8bn last year from $31.5bn in 2017, having already plunged from $85bn in 2013.
‘Severe economic crisis’
Over the last half-decade, the size of Venezuela’s economy has halved – though the country still has the largest oil reserves in the world.
“The GDP figure released by the Central Bank is in line with the 25-percent contraction being projected by the International Monetary Fund for 2019,” said Paula Garcia Tufro, deputy director of the Adrienne Arsht Latin America Center at the Atlantic Council.
“The inflation number of 130,060 percent, on the other hand – while a possible recognition of the economic crisis underway – is still well outside of IMF projections, which estimate an inflation level of 1.37 million percent for 2018 and project 10 million percent inflation for 2019,” Garcia Tufro told Al Jazeera.
This data will be used as part of an official narrative on the part of the Maduro regime that seeks to point to external sanctions as the cause of the economic collapse.
Paula Garcia Tufro, Atlantic Council
Venezuela’s opposition-controlled congress has released its own figures since 2017, with the government generally remaining silent on economic data.
Congress said that April inflation was 44.7 percent, while for 2018 it reached 1.7 million percent – 13 times the official figure. The IMF’s estimate was 929,797 percent – halfway between the official figures and opposition ones.
According to Bloomberg, inflation has actually slowed somewhat as a result of monetary restrictions imposed by the government that require banks to park large amounts of cash at the central bank.
This prevents loans to Venezuelans who would otherwise use the funds to purchase black-market dollars, thus exacerbating the currency’s slide. But tightening the money supply also restricts economic activity. At the same time, the government has relaxed currency-exchange controls to help facilitate economic recovery.
“The Maduro regime has been quietly taking steps to liberalise the economy,” Garcia Tufro added. “It is possible that the government perceives that the posture of not acknowledging the dire economic reality being felt by the Venezuelan people is untenable.”
“However, it is more likely that this data will be used as part of an official narrative on the part of the Maduro regime that seeks to point to external sanctions as the cause of the economic collapse,” she said.
But Garcia Tufro said the latest data confirm “the severe economic crisis was well underway prior to the significant ratcheting up of sanctions on Venezuela, and importantly, preceded the imposition of US sanctions on Venezuelan oil in January 2019”.
‘Collapse in output’
As oil investment evaporated over the last few years, production levels tanked. The chaotic and dysfunctional economy has deepened the population’s despair, as the value of salaries has plummeted.
“A big fall in oil export revenue is never good,” said Brad Setser, an economist at the Council on Foreign Relations. “It forces countries with limited reserves – and limited ability to borrow – to cut back on their imports, and generally creates budget pressure.”
“Most oil exporters rely on taxing oil exports, and the profits from their state oil companies form a large part of their revenue,” Setser told Al Jazeera.
And oil sanctions by the United States have only intensified the situation. With oil exports continuing to dive, the crisis could worsen.
“The impact of the fall in Venezuela’s oil exports has gone far beyond the expected difficulties,” Setser added. “The collapse in output in Venezuela reflects both a real external shock from falling oil revenue and Venezuela’s own mismanagement of the economy.”
“The result has been one of the largest falls in output experienced by any country not at war,” Setser said.