MercoPress. South Atlantic News Agency

Second contraction year for Venezuela; 2% expansion forecasted in 2011

Central Bank President Nelson Merentes

Venezuela’s economy contracted 1.9% 2010, marking a second year of recession according to a release from the Central Bank. The economy shrank 3.3% in 2009, but President Hugo Chavez's government said the country is now pulling out of recession and on course for 2% growth in 2011.

“We foresee a positive tendency for 2011,” the Central Bank said in its annual report on preliminary economic data for this year. The report said oil GDP shrank 2.2% in 2010 while the non-oil economy fell 1.8%.

Estimated annual inflation in December was 1.6%, bringing the annual consumer price rise for 2010 to 26.9%, up from 25.1% in 2009, said the bank.

Venezuela's inflation is among the highest in the world. Central Bank President Nelson Merentes told state TV that inflation for next year was forecast at between 23-25%.

In the bank's report, Merentes said electricity rationing -- caused by a shortage of rain earlier this year -- was a factor in the economy's performance in early 2010 before “signs of recovery” could be seen later in the year.

The economy's contraction in 2010 reflected a 2.8% decline in private consumption and a 1.7% fall in internal demand, the report said.

The worst-hit areas during the year include manufacturing, down 11.9%; construction, down 7.3%; and the financial sector down 6.9%. The best-performing sector was telecommunications, which grew 7.8%.

Critics say President Hugo Chavez is leading the economy to ruins because of his nationalizations policy, a bureaucratic system of currency controls and other policies intended to launch his Bolivarian-Socialist revolution in Venezuela.

The central bank report said Venezuela's exports fell 12.5% in 2010, while imports dropped 5.5%.

The 2010 current account surplus was estimated at 13.9 billion USD, or 7.3% of GDP, while the capital account deficit was forecast at 20.1 billion. That would compare with a current account surplus of 8.6 billion and a capital account deficit of 14 billion in 2009.

The economy of Venezuela is largely based on the petroleum sector, which accounts for roughly a third of the country´s GDP, around 80% of total exports, and more than half of the government operating revenues. Venezuela is the fifth largest member of OPEC and one of the main suppliers of crude to the US