Venezuela shows signs of dipping into recession

A decline in imports, a rise in inflation, and an increase in poverty levels in Venezuela all point to one thing: recession.

Even though the Central Bank of Venezuela (BCV) has yet to publish the most recent GDP figures, analysts have determined that the South American country shows signs of slipping into a recession.

A country is technically in a recession when it experiences more than two consecutive slow quarters, and according to El Universal, the decline in imports in Venezuela indicates a severely troubled economy.

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Bank of America analyst Francisco Rodriguez explained that if Venezuela’s imports continue following their downward trend, the total imports would decline by 35.5 percent in 2014.

Venezuela a high-risk country

In August, China’s Dagong Global Credit identified Venezuela as a high-risk country in both the short and the medium term, and gave the country’s credit rating a BB-.

Dagong’s report noted a variety of factors that contributed to its poor credit rating of Venezuela: social unrest, low international reserves, risk of political instability, the big fiscal gap, and pressure to devalue the local currency.

The firm also predicted that the government deficit could rise to upwards of 60 percent of GDP by 2018, as it is currently estimated at 52.2 percent of GDP and there are no signs that the government will alleviate the debt in the near future.

With Venezuela’s government in extreme debt, the country’s citizens are feeling the financial burden at the most fundamental level, with many Venezuelans unable to provide food for their family.

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The Venezuelan National Statistics Institute (INE) revealed the staggering reality of Venezuela’s poverty levels. Due to high levels of inflation, half of the population in five Venezuelan states can’t even afford to buy the basic food basket, revealing an astonishing level of poverty throughout the country. These five states are Amazonas, Apure, Monagas, Portugesa, and Sucre.

Almost 10 percent of the entire Venezuelan population can’t afford to buy the food basket, largely because inflation jumped to well over 50 percent in 2013.  The poverty rate has not only risen in the Capital District over the past year, but extreme poverty has swept the rest of the country as well.