Venezuela’s Economy: The Latest News and Trends
Venezuela’s economy has been in a state of freefall for years now, with the country’s once-promising growth coming to a halt due to years of mismanagement, rampant inflation, and an increasingly unstable political climate. The country’s economic and humanitarian crisis has spiraled further, with the International Monetary Fund forecasting a 35% contraction in output in 2021. In this article, we take a look at the latest news and trends on Venezuela’s economy.
Overview of the Current Economic Situation
Venezuela’s economy has contracted sharply, with the most recent estimates of inflation reaching around 200,000%. This situation has been compounded by a severe shortage of food and medicine, and it has been estimated that over 90% of the population is living in extreme poverty. With the economy being driven by the export of oil, the ongoing political and economic instability has severely impacted the country’s oil production, with output dropping as low as 500 thousand barrels a day by early 2021, down from 2 million barrels in 2019.
Effects of Economic Crisis on the Standard of Living
The economic crisis has had a devastating effect on the population of Venezuela, with the UN estimating that close to 5 million people have left the country since the crisis began over 6 years ago. This has caused severe overcrowding in nearby countries, such as Colombia and Brazil, with Venezuelans seeking a better life and economic opportunity.
In addition to this, the crisis has worsened existing shortages of food and medicine, leading to a collapse of the country’s public health system. Hyperinflation has drastically reduced the wages and purchasing power of the population, meaning that many are unable to afford basic necessities such as food, clean water, and medical care.
The Country’s Efforts to Combat the Crisis
In an effort to combat the crisis, the Venezuelan government has taken a number of measures. These include:
• Implementing the Petro cryptocurrency, which is backed by the country’s oil reserves
• Allowing citizens to purchase goods and services with the Petro currency
• Launching a “Housing Mission”, which provides low-income families with subsidized housing
• Increasing public investment in infrastructure
• Lifting certain price controls
• Declaring food and medicine an essential service
• Creating state-run food-distribution centers
• Tackling the electric power crisis
• Reducing the VAT from 12% to 6%
• Attempting to restructure its external debt
International Assistance
The international community has also stepped in to assist in the economic recovery of Venezuela, with the United Nations and its partners recently launching the most extensive humanitarian appeal to date for the country. The UN’s appeal is asking for US$899 million to help support the country’s most vulnerable people and those displaced by the crisis. In addition to this, the European Union recently approved a €520 million package of financial aid to help the country recover from the crisis.
The Role of Bitcoin in Venezuela’s Economy
The cryptocurrency Bitcoin has become increasingly popular in Venezuela as a means to circumvent the strict currency controls imposed by the government. This has resulted in a surge in Bitcoin trading volumes, with the country’s citizens using the currency to make international payments as well as to buy goods and services domestically. This has led to a thriving black market, with many Venezuelans turning to Bitcoin or to the Petro cryptocurrency as a means for making and receiving payments.
The Future of Venezuela’s Economy
While the future of Venezuela’s economy is uncertain, it is clear that the country’s economic woes are likely to continue for the foreseeable future. The effects of the crisis are likely to continue to ravage the population, with the UN’s humanitarian appeal likely to be just a drop in the ocean in terms of the amount of aid needed. In the long-term, it is likely that the country will need to undertake significant economic reforms in order to turn the situation around, including currency reforms and measures to reduce inflation.
Venezuela’s economy has been in freefall for years now, with the most recent estimates of inflation crossing the 200,000% mark. This has been compounded by a severe shortage of food and medicine, and it has been estimated that over 90% of the population is living in extreme poverty. In order to tackle the crisis, the Venezuelan government has taken a number of measures, while the international community has also stepped in to provide assistance. The future of the country’s economy remains uncertain, but it is clear that Venezuela needs to undertake significant economic reforms in order to pull itself out of the crisis.
