MercoPress. South Atlantic News Agency

Venezuela’s economy contracts 3.3% in 2009; modest forecast for 2010

Nelson Merentes, president of BCV

Venezuela's economy fell by 3.3% in 2009 after contracting 5.8% in the last quarter, informed the Central Bank of Venezuela (BCV) which blamed the global crisis and falling prices for oil the country’s main export.

In the fourth quarter 2009, GDP fell by 5.8% over the same period of 2008 which together with the decline of 2.3% in the first nine months, resulted in a contraction of 3.3% in the year, the BCV said in a statement.

Last December, the president of the BCV, Nelson Merentes, in his traditional year-end speech and based on preliminary data, said that the economy had shrunk by 2.9% in 2009, noting it was the first fall that Venezuelan GDP suffered in the past five years.

The BCV said in the report released on Tuesday that the oil business declined by 7.2% in 2009 over the previous year, due to the “lower level of production” of the country, the fifth largest exporter of crude.

The drop in production was due to compliance with the cuts adopted by the Organization of Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member, said the BCV. According to official figures, Venezuela agreed to reduce oil production by 364,000 bpd in 2009, leaving production at some 3 million barrels a day.

Meanwhile, non-oil activity contracted by 4% in the fourth quarter of 2009, said the official report without specifying a global figure of the year on the conduct of that business.

During the fourth quarter, the largest declines in non-oil activity occurred in the areas of transport services (-16.9%), commerce (-13.9%) manufacturing (-6.9%), mining (-4.8%), construction (-3.5%) and real estate services (-2.8%), said the BCV.

By contrast, growth was recorded in the sectors of communications (10.5%), electricity and water (5.5%), producers of general government services (2.8%) and community, social and personal services (0.6%), the BCV added.

The Venezuelan government said that in 2010 the economy would record a “modest” growth of 0.5%. The economy expanded by 4.8% in 2008, 8.4% in 2007, 10.3% in 2006, up 9.4% in 2005 and 17.9% in 2004.