Venezuela’s CB announces 8.78% growth, contrasting with independent estimates
On 29 August, the Central Bank of Venezuela said that the national economy grew by 8.8% in the second quarter of this year, and 8.4% in the first quarter.
The bank, known as BCV for its initials in Spanish, added that Venezuela’s GDP has grown for 13 consecutive quarters, with a “process of economic recovery starting in the second half of 2021.”
Figures compare quarters with the same period from the previous year, and are based on 2007 prices.
The BCV’s communiqué also blamed an “economic blockade” and “unilateral aggressions” by the US, the European Union and other countries for “significant economic losses since 2015.”
Venezuela's central bank says that the economy has grown for 13 straight quarters, after years of contraction. Other experts and organisations are presenting significantly lower growth estimates.
Leading sectors: Oil, mining, finance, and construction
The oil sector would make the largest contribution, with 15.9% growth in the first quarter and 11.1% in the second. General License 44, which in practice authorised foreign companies to buy and invest in Venezuelan oil, would be a key factor, as it lasted from October 2023 to the end of May this year—including a 45-day wind-down period.
Crude oil output has also gradually increased in the last two years, largely thanks to the revamp in operations from Chevron and a handful of European corporations.
Non-oil activity would have grown by 5.5% and 6.6% in the same two periods, according to the BCV. In the second quarter, three sectors stand out in the BCV’s announcement: mining with 22.8%, finance and insurance with 20.9%, and construction with 18.4%.
Watchdogs and experts question numbers
The Observatorio Venezolano de Finanzas, a watchdog, has questioned the data and methodology of the BCV. It calculated growth at 2% for the first quarter; oil activity would have grown by 20%, while the non-oil sector by 1%.
The OVF also claims there were various periods of economic contraction in the last 13-quarter period, and has different inflation metrics to the BCV.
Earlier this year, multiple economists and multilateral organisations, including the IMF, estimated growth of around 4% for the year. In a June report, the UNDP argued that the main drivers for growth this year would be greater public spending in the run-up to the presidential election, and higher oil revenues.
Venezuela’s institutions have been withholding many important statistics and are perceived to have low credibility. There are no absolute GDP numbers since the first quarter of 2019.
Prospects for the next quarters
If growth was largely driven by greater oil revenues and electoral spending, the remainder of the year looks grim. The vote already took place on 28 July, while oil revenues are set to either stabilise or fall, even if production stays on its gradual, upward trend. In July, the discount of Venezuela’s Merey crude to US benchmarks widened back to levels seen before General License 44.
On the policy side, we can expect some continuity as President Nicolas Maduro announced a cabinet reshuffle on 27 August. Economics remain in the hands of Vice President Delcy Rodriguez, who has steered the sector for the last five years.
It is also unlikely that economic sanctions are loosened in the short term, after electoral results have been questioned or deemed fraudulent by international observers and multiple foreign governments, including the US.
There is still room for changes in the coming year; as election results are still being contested by the opposition, and as foreign governments are pushing for political negotiations.
The exchange rate is showing some signs of weakness, after a year of stability thanks to generous BCV interventions. The gap between the official and black-market rates has grown to 20%.
