Venezuela: Macroeconomic Country Outlook
- GlobalData forecasts the real GDP to grow by 2.4% and consumption by -5.9% in 2022.
- Venezuela was ranked last out of 136 nations in the GCRI Q4 2021.
- GlobalData forecasts international arrivals to the country to increase by only 16.8% in 2022, given the current situation of the economy as well as COVID-19 resurgence.
PESTLE summary
- Political: Venezuela’s relationship with China is improving. Venezuela has been exporting a large portion of its oil production to China instead of debt repayment. However, in early 2019, oil production slowed down considerably and, as a result, its debt repayment also slowed down. The present government enjoys the support of Chinese authorities, and the country is likely to keep on financing Venezuela. In March 2020, Venezuela asked for financial support from China, as it has been badly affected by the dropping price of crude oil along with the pandemic. China has provided Venezuela with protection kits, medical supplies, and equipment needed to combat COVID-19. As of December 2021, China's import of crude oil from Iran and Venezuela hit a three-year high as compared to the same month last year.
- Economic: Venezuela raised its minimum wages. In May 2021, the Government of Venezuela increased the monthly minimum wage by 289%, amounting to about $2.40 at the exchange rate estimated by the country's central bank. The economy is in its fifth year of hyperinflation, its eighth year of recession in 2021, and has been slowly and disorderly undergoing dollarization since 2019. According to the labor minister, the change in minimum salary would increase from VEF1.8 million to VEF7 million from May 2021 onwards. This will help people to hold more cash in hand when commodity prices are peaking.
- Social: Low gender equality in the country. According to the World Economic Forum’s Global Gender Gap Index – 2021, Venezuela is ranked 91st out of 149 countries, which is a higher rank as compared to Bolivia (61st) and Peru (62nd). Venezuela needs to implement more policies to improve the economic participation of women in the country. The country was ranked 112th out of 153 countries in terms of economic participation and job opportunities in the Global Gender Gap Index – 2021. The low female labor force participation rates act as an impediment to the overall growth of the economy.
- Technological: Technology transfer from China. China’s involvement in Venezuela is displayed in the improved performance of the private household appliances plant, Consorcio Digital, which has increased its production in cooperation with its Chinese partner, TCL Corporation since 2013. In November 2018, the government rolled out "Carnet de la Patria", or ‘Fatherland card’, a universal identity card. The ID transmits the data about cardholders to the government’s computer servers, which are increasingly being linked by the government to provide subsidized food, health, and other social programs to millions of Venezuelans. The technology of the identity card was developed in collaboration with Chinese telecoms giant, ZTE.
- Legal: Democratic set up of government. The Venezuelan government is a federal republic consisting of 23 states. Each state has its own self-rule, but they operate under the central government and are answerable to it. The executive power is vested with the President, the Vice President, and the council of ministers. The President is both the head of state and government and is elected for a six-year term.
- Environmental: Government is preparing a new draft for alternative energy. To combat climate change, Venezuela is focusing on the production of clean energy. Venezuela is in the process of drafting renewable energy legislation that would enable the private sector to break free from the OPEC country's accident-prone power grid. The government-controlled National Assembly is currently fine-tuning an initial draft of the "alternative energy" bill and the complete version will be presented to the legislature in January and approved in the first half of 2022. Utilizing renewable energy in the country, would alleviate rising poverty rates in the country by creating job opportunities and reducing the presence of negative health impacts due to pollution. It would also ease the energy burden on the Guri dam, likely reducing the number of national electricity blackouts.
Key Fundamentals
Macroeconomic Outlook
- Venezuela is placed in a strategically beneficial position within the Americas, in close proximity to the US and other North American countries. The country holds strong diplomatic and economic links with many Latin American countries, such as Argentina, Chile, Cuba and Brazil. Since July 2012, the country has been a permanent member of the South American trading bloc MERCOSUR, a customs union which aims to promote South American integration.
- In August 2021, the Government of Venezuela and opposition-initiated dialogue in Mexico is being mediated by Norway. The opposition is demanding Maduro to release political prisoners and provide guarantee that candidates are eligible to run regional elections which were held in November 2021.
- On September 6, 2021, the government and opposition claimed to have reached a partial agreement regarding social measures, particularly on those affected by COVID-19, and a territorial dispute concerning neighboring Guyana. A productive political dialogue will bring about much needed relief to Venezuelan society and economy.
GlobalData Country Risk Index (GCRI) - Q4 2021
Venezuela was ranked last out of 136 nations in the GCRI Q4 2021. The country’s score is in the very high-risk nations band (above 60). Venezuela’s overall risk score is higher than the Latin American countries and the world average in GCRI Q4 2021. The country had an overall score of 78.9 and did not perform well (compared to the Latin American average) in any of the parameters. Political instability, economic crisis, and hyperinflation were major downside risks to the country.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy. The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Latin American nations in this publication include Venezuela, Brazil, Chile, Columbia, Mexico, Peru, Venezuela, and Ecuador.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Venezuela PESTLE Insights - A Macroeconomic Outlook Report
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