Surprise: Venezuela Becomes GDP Growth Champion

The Sabana Grande pedestrian road in Caracas. (Photo: QuinteroP)

But country still among the poorest in Latin America after years of crisis.


Venezuela has made a surprising economic recovery this year and is now expected to post the third-highest GDP growth in Latin America this year and the highest next year, according to a Latinvex analysis of the latest World Economic Outlook from the International Monetary Fund (IMF).

Two years ago – in 2020 – Venezuela’s economy plunged 30 percent following six consecutive years of declines as a result of the government’s economic policies.

As late as April this year, the IMF expected Venezuela’s economy to grow by 1.5 percent both this and next year. Now its updated projections see growth of 6 percent this year and 6.5 percent next year.

Meanwhile, the fund also revised its data on the size of Venezuela’s economy this year – from $49.8 billion to $82.1 billion. That means that instead of ranking as the sixth-smallest economy in Latin America as estimated in April, Venezuela now ranks in 10th place out of 18 countries.

It’s still far off from its earlier glory days a decade ago when its GDP of $352.2 billion ranked as the fifth-largest in Latin America.

In per capita terms, Venezuela last year ranked as the poorest country in Latin America, with a a GDP per capita based on purchasing-power-parity (PPP) of only $5,558 and this year as the second-poorest, with a PPP GDP per capita of $6,040, according to the Latinvex analysis of IMF data. That’s a far cry from being the six-richest country in Latin America in 2012, with a GDP per capita based on purchasing-power-parity (PPP) of $18,553.

Venezuela has also managed to dramatically cut its inflation, which last year stood at 1,588 percent. This year the IMF expects inflation of 210 percent and 195 percent next year. As late as April, the fund estimated inflation of 500 percent for this and next year.

The increased economic growth and reduced inflation is due to a change in government policies, which have allowed increased dollarization, control of inflation and selective privatization.

The adoption of foreign currencies, and specifically the U.S. dollar, has dampened the impact of hyperinflation in Venezuela—at least for those with access to dollars (salaries in Venezuela’s state sector are still paid in bolívars), according to Ryan Berg, senior fellow in the Americas Program and head of the Future of Venezuela Initiative at the Center for Strategic and International Studies in Washington, D.C.

“The search for a stable currency, coupled with remittances from abroad, drove an organic dollarization process in the face of years of hyperinflation,” he wrote in an analysis earlier this year. “The regime has even worked with banks to make it easier to receive dollar-denominated remittances.”

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