Macroeconomic Forecast Venezuela

Fuelled by consumer demand and government spending buttressed by high world oil prices, the Venezuelan economy expanded by a very strong 10.2% y-o-y in real terms in Q405, bringing 2005 growth to 9.3%, in line with our revised 9.2% estimate. The economy has now expanded for nine straight quarters, following a deep recession in 2003. Although the oil industry grew by just 2.7% y-o-y in Q405, reflecting the stagnant output of state oil firm PDVSA, the non-oil economy's 11.0% y-o-y expansion benefited from increased government spending (up 43% last year, not including spending on social programmes by PDVSA), which was

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