IMF sees inflation in Venezuela soaring to 2,200% by 2017

International organization predicts economy will shrink by 8% this year amid worsening crisis

Amanda Mars
Protests in Caracas against drugs shortages in March.
Protests in Caracas against drugs shortages in March.FEDERICO PARRA (AFP)
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El FMI calcula una inflación del 2.200% para 2017 en Venezuela

The Venezuelan economy seems to be trapped in a spiral of inflation for the foreseeable future. In January, the International Monetary Fund (IMF) predicted prices in the South American country would rise year-on-year by 720 percent. Less than three months later, in a report presented in Washington on Tuesday, it now says that figure will have soared to 2,200% by the end of 2017, and will climb 1,642.7% a year on average. Then, in 2021, the figure will hit 4,600%.

Predicting how prices will behave over the long term is a complex process, but nevertheless, these projections indicate the rampant economic chaos in Venezuela. To give some idea of the scale of the disaster facing the country, within six years, prices will have multiplied by 400 million, meaning an item that costs 100 bolivars today will cost 40 billion bolivars by the end of 2021.

This hyperinflation comes in the wake of a steep decline in the value of the Venezuelan bolivar, which has lost practically all its value

This hyperinflation comes in the wake of a steep decline in the Venezuelan bolivar, which has lost practically all its value since Nicolás Maduro assumed the presidency. The official exchange rate is one US dollar for 6.3 bolivars, but according to dolartoday.com, the unofficial reporting desk for the underground economy, a greenback is worth 1,100 bolivars on the black market. In short, the Venezuelan bolivar is worth less than 1% of its official value.

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Venezuela, a crude oil exporter, is also reeling from the collapse of hydrocarbon prices. Gross Domestic Product (GDP) fell by 4% in 2014, by 5.7% in 2015 and is expected to shrink by 8% this year, and 4.5% next year, according to IMF forecasts.

La incertidumbre política y el renovado declive en el precio del petróleo han agravado los desequilibrios macroeconómicos y las presiones", destaca el FMI en su informe.  “Political uncertainty and the renewed decline in the price of oil have deepened existing macroeconomic imbalances and pressures,” the report explains, adding that it predicts unemployment will rise from 7% to 17% this year and reach 20% in 2017.

English version by Dyane Jean François.

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