Macroeconomic Forecast Venezuela
April 2007 | Macroeconomic ForecastsIf you would like to subscribe to Andean Group Monitor and gain instant access to this article, please click here to subscribe.
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BMI View: Finance Minister Rodrigo Cabezas has declared that GDP growth in Q107 measured at least 7% y-o-y, and is likely to exceed 8%. The resurgence of oil prices amid geo-political tensions in the Middle East has helped spur the Venezuelan economy, and we are poised to raise our own end-year projection of 5% should these estimates be confirmed. That said, our core economic outlook for the economy remains less emphatic, due to the significant imbalances brought on by expansionary government policy. Cabezas also dismissed the IMF 's forecast for inflation ending 2007 at 21.6% as a political calculation, reiterating the government's own projection of 12.0%. Despite inflation falling to 18.4% y-o-y in March, we believe this is largely a result of one-off factors, including large bond sales and a reduction in VAT, and does not represent an easing of underlying demand-pull pressures. With this in mind, we leave our year-end inflation forecast unchanged at 17.3%.