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Venezuela - Economy

Whitaker's Almanack Version

Financial Outlook

Economic growth slowed to 1.6% in 2013 from 5.6% during the previous year, according to official figures, although private economists believe that the economy shrank. In the 2014 budget finance minister Nelson Merentes forecast growth of 4% for the year. However, local think tank Síntesis Financiera predicted a 2.5% contraction. The economy certainly faces enormous problems. Dollar shortages helped to fuel a record 73% decline of the bolivar on the black market in 2013, which in turn helped to stoke inflation of more than 50%. Meanwhile, rising domestic demand, declining production, and a boom in North American shale oil output have caused a drop in oil exports, which account for 95% of foreign exchange earnings. The government of President Nicolás Maduro has responded to the economic malaise with draconian methods. In November 2013 he ordered the seizure of a chain of electronics stores, accusing them of overcharging, and forced them to lower their prices. In January 2014 he introduced a price control law that sets a 30% cap on company profits. Anyone found guilty of hoarding, overcharging, or “destabilizing the economy” faces a heavy prison sentence. The government also cut the amount Venezuelans could spend abroad on credit cards.

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