September 2010, Mark Weisbrot and Rebecca Ray
This paper examines recent economic data, including the most recent data released the third week of August 2010, in an attempt to evaluate the Venezuelan economy’s prospects in the foreseeable future. It finds that the Venezuelan economy, which went into recession in the first quarter of 2009 after six years of record economic growth, is now most likely in recovery, and that the 2009 recession has probably ended. This is based on seasonally adjusted quarterly data, which show that the Venezuelan economy grew by an estimated 5.2 percent in the second quarter of 2010, on an annualized basis.
The paper then considers possibilities and arguments that the Venezuelan economy will remain mired in recession or stagnation, and/or is doomed to long term decline. It finds that although there are a number of analysts who are predicting that the Venezuelan economy is on the verge of inevitable (and long-anticipated) ruin, there is nothing in the recent data – or that of the last decade – to indicate that this is true.
The paper concludes that if the Venezuelan government maintains adequate levels of aggregate demand – including a commitment to strong counter-cyclical policies as necessary – the Venezuelan economy will grow, and the progress in employment, living standards, poverty reduction, and income equality that were seen during the previous expansion will continue. Of course this is not guaranteed – it depends on whether the government is willing to make, and maintain, this commitment to economic growth.