19 November 2009

Venezuela: Chavez to change GDP measure methodology

Do readers remember the article by Andres Oppenheimer, in October 2005, where he exposed that Venezuela's Statistics Institute managed to decrease poverty levels, after President Hugo Chavez publicly blasted a report that showed a poverty increase of 11% since his ascent to power in 1999? The article was aptly entitled "¿Un milagro en Venezuela?" A true miracle indeed, for Chavez thinks he has the power to order poverty levels to decrease.

Now the Venezuelan caudillo wants to apply the same socialist formula to GDP measurement methodology, after the Central Bank published figures indicating that the country is, officially, in recession, with a GDP contraction of 4,5% in the last quarter. Here's an interesting bit of information, from Goldman Sachs' analyst Alberto Ramos:

The performance of real activity economy continues to deteriorate and the economy is developing growing symptoms of Dutch Disease (atrophy on non-commodity tradable sectors of the economy) and stagflation (inflation continues to accelerate despite the contraction of the economy during 2009). Real GDP declined a larger than expected 4.5% yoy during 3Q2009 (down from -2.4% yoy during 2Q2009); the market consensus was for a decline between -2.0% and -1.0%.. The very poor performance of real GDP during 3Q was driven the large 10.7% yoy decline in domestic demand. Private consumption declined -4.8% yoy during 3Q (from -2.6% yoy during 2Q), and investment spending retrenched a large -14.5% yoy (from -2.8% yoy during 2Q). Public consumption grew 2.6% yoy during 3Q. Private consumption spending continues to slow down as entrenched inflation (core inflation is running above 36% yoy) is eroding real disposable income and credit growth is decelerating fast while investment has been impaired by a business unfriendly policy mix.
Therefore expect a flurry of 'economic analyses' from Mark Weisbrot, and other such apologists, and, certainly, a blast of statements from Chavez and his top minions officials.

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