Economic, political and social chaos
The economic, political and social crisis continues to deepen. Recession hit the economy in late 2013. Circumstances were harsh: electricity and water cuts, soaring inflation, price and foreign currency controls, shortages of imported goods and strong state interventionism which led to foreign investment flight and deterred international companies.
The fall in oil prices in late-2014 made things even worse. Oil accounts for more than 20% of GDP, 90% of exports and 40% of fiscal revenues. Although economic data has not been released since Q3-2015, we estimate the economy shrank by -18% in 2016, after -6.5% in 2015. GDP is expected to continue its downward spiral until 2018 at least, completing five consecutive years of recession.
At the same time, inflation is estimated to have soared above +1000% in 2016, the highest rate in the world. Hyperinflation was fueled by (i) high monetization of the public debt by the Central Bank; (ii) strong depreciation of the currency in both the official and black markets while 80% of goods consumed are imported; (iii) dramatic shortages of basic goods.
Major demonstrations against President Nicolas Maduro erupted after he had called for a “constituent assembly” to modify the Constitution and enlarge his powers. Confrontations with the police and the army have led to dozens of deaths.