A new study from the Latin American Institute of Economics (ILEA) finds that the Venezuelan economy is now experiencing a serious economic crisis due to a combination of factors: a sharp drop in crude oil prices, a severe shortage of imported goods, and the devaluation of the bolivar.
The study finds that as the country’s oil output falls below its capacity, inflation rises and the inflation rate will skyrocket in the coming months.
This, according to the study, is “likely to lead to further deterioration of the economic situation” and a “dramatic increase in unemployment.”
According to the report, there is no way the Venezuelan government can keep its current policy of inflation, a policy that has left Venezuelans on the brink of starvation, at bay.
“This situation has created a severe financial stress for the economy,” said ILAE researcher Francisco Rodriguez.
“The economy needs a long-term plan to address the economic crisis, which means that the government needs to act quickly to improve the current situation.”
The report found that Venezuela’s government’s policies to reduce the countrys oil dependence have led to a steep fall in oil production, a sharp fall in foreign currency reserves, a huge drop in exports, and a massive rise in inflation.
The study’s authors found that the current economic crisis is due to: •a steep drop in oil prices since the beginning of the year.
Oil prices have fallen to a level where Venezuela cannot produce enough crude oil to meet demand.
The price of oil has dropped by more than 50% from its peak of $115 per barrel in July of last year.
The countrys government, however, is spending only half of what it made in 2015 on oil production.
In fact, according the report’s authors, the government has “been spending less than it took in in 2014.”
The Venezuelan government, according in the report , has “used its oil revenues to buy foreign currency and foreign exchange, in particular to purchase $7.3 billion of US dollars.”
•a severe shortage in imported goods and services.
The government is “losing a third of its oil revenue every month” and is “trying to cover this shortfall with additional import revenue.”
In 2017, imports of the main oil-producing countries, including Venezuela, fell by almost 50% compared to 2016, the report says.
The situation in Venezuela has led to shortages of essential goods like flour and medicines, which is “driving a significant increase in food prices.”
In fact the food prices are so high that a group of Venezuelan students recently filed a lawsuit against the Venezuelan central bank.
According to ILAe, the Venezuelan Central Bank has “lack of the capacity to meet this financial pressure.”
In the meantime, the country has been forced to import imports of food, medicine, and other essentials.
This has resulted in “an additional 20% decrease in the prices of goods imported by Venezuelan citizens, and in a 50% increase in the price of goods manufactured in Venezuela.”
According the study’s findings, “these changes are having a profound impact on the domestic economy and the national economy.”
According a report by the Center for Economic and Policy Research (CEPR), Venezuela’s economy has been losing revenue for over a decade, “despite the oil-price fluctuations, the low oil price, the inflation and the fiscal crisis that has been taking place since 2013.”
The report found the Venezuelan oil-dependent economy is experiencing “a severe economic crisis because of a combination for several reasons.”
•A sharp decline in oil revenue due to the drop in prices.
Venezuela’s economic situation is now “under severe pressure because of the drop-off in crude prices, the sharp drop-out of crude oil production and the sharp decrease in foreign exchange reserves.”
This has led the government to spend less on the import of imported essential goods and imports, which “result in a significant decrease in import revenues.”
•The increase in inflation due to currency devaluation.
“Inflation has risen dramatically” due to Venezuela’s devaluation in 2017.
The report says that the inflation has been “driven by the government’s inability to meet its fiscal deficit obligations, as well as by the lack of adequate foreign exchange supply.”
In addition, “the current currency crisis and the collapse in oil revenues are causing a huge increase in currency reserves that are being used to cover the government budget deficit.”
•A huge increase of unemployment.
According the report: “In 2016, Venezuelan unemployment rose from 9.6% to 18.5% and this percentage will rise to 18% by 2021.
This is a serious financial stress that has resulted from the fact that the country is now running a fiscal deficit.”
According its report, the IMF expects that “the economic crisis in Venezuela will continue to deepen in 2021 and beyond, and that there will be serious difficulties in the future.”
“The economic crisis will continue in Venezuela and will have an impact on other countries,” the report adds.