Venezuelan economy contracts 5.8% in first quarter over a year ago

GDP shrank 5.8% in the first quarter from a year earlier, the central bank said in a statement. Private economists and consultants forecast a 7% decline in 2010. The IMF anticipates Venezuela will be the only South American country to see a decline in GDP this year.

Venezuela among the world’s five top oil producers is entering a second year of recession as President Hugo Chavez’s nationalization drive saps investment and his price and currency controls squeeze industrial output.

Industrial production plunged 9.9% in the first quarter after Chavez ordered 20% cuts in electricity usage because of a severe drought that threatened to collapse the power grid. Inflation has accelerated to a seven-year high, with prices rising 31.9% in April from a year ago.

In the first quarter, transport fell 15.9%, commerce shrank 11.6% and the financial industry sector contracted 9.7%, the central bank said. The decline stems from reduced imports, electricity rationing and the fall in investment. Venezuela’s oil industry contracted 5%, the non-oil sector fell 4.9% in the quarter and private consumption dropped 5.9%, the bank said in the report.

Chavez, who devalued the two-tier Bolivar Jan. 8 by 50% and 100%, said April 26 that the economy may shrink for a second straight year as it sheds “capitalist” consumption habits. GDP will probably shrink 2.4% in 2010, according to the median forecast of nine banks including Bank of America, Merrill Lynch and Citigroup Inc. The economy contracted 3.3% during 2009.

The government posted a current account surplus of 7.2 billion USD in the quarter while the capital account had an 11.5 billion USD deficit. Direct investment outflow reached 3 billion USD as companies pulled capital out of the country following nationalizations in the steel, cement, oil and food industries.