The forecasts of the Ecoanalítica consultancy for 2023 are not very optimistic. For this year they foresee an inflation rate of between 300% and 400%, an exchange rate above 34 bolivars per dollar and a variation for the economy of 4.7%. A fact to highlight is the projection of informal employment, which is very likely to remain at 48% of the population
The conditions that led to a recovery of the Venezuelan economy in recent years no longer have a significant impact on production. Just like when a ball bounces, the country is at the bottom, so the expectation is whether it will rise again. Representatives of the Ecoanalítica consultancy pointed out in a forum organized this Thursday, March 3, that the least activity that has been registered since the end of 2022 continues in the first part of 2023.
They highlighted that the decrease in consumption, the acceleration of inflation and the exchange rate, as well as a decrease in the Gross Domestic Product (GDP) are a reflection that the country is “in the bad stage of the rebound”.
Luis Barcenas, Chief Economist at Ecoanalytiche said in the forum «Two sides of the same coin: Consumption and finance», that the slowdown of the Venezuelan economy is largely due to the rise in the food basket, which exceeded 350 dollars. “If we enter an environment of hyperinflation there will be a drop in consumption in the coming months.”
He indicated that the results they estimate for various indicators reflect that the Venezuelan economy needs little to reactivate, and “it needs little to reach a peak.”
Ecoanalítica’s estimates for this year are an inflation rate of between 300% and 400% with a monthly average of between 10% and 12%, an exchange rate above 34 bolivars per dollar and a GDP of 4.7 %. A fact to highlight is the projection of informal employment, Although they indicate that it will decrease a bit, it is very likely that it will remain at 48% of the population.
“We are seeing the bad of the economic rebound,” Barcenas said.
He also indicated that bank financing will continue to be limited in 2023 and if taxes continue to be very high, it will generate a significant impact on the economic activity of companies.
“Much of what happens in the Venezuelan economy is based on the informal economy. Currency in cash represented 2.4 times liquidity in bolivars in November and in February it is estimated to have been 3.4 times,” he said.
For his part, Diego Santana, senior economist, presented results of Ecoanalítica’s Economic Activity Index with which he calculated a growth of 8.7% in the last quarter of 2022of which 3.3 percentage points (pp) are explained by the use of the industry’s installed capacity and 1.2 pp by consumption.
He stressed that the winning sectors during the “economic rebound” are health, food, personal care, retail, technology and communications, real estate and housing services. “They are few and limited,” he said.
The ghost of hyperinflation
The members of Ecoanalítica present at the forum highlighted the possibility of a return to the hyperinflationary process in which the country lived for three years, and which since the end of 2021 it had already managed to overcome.
Giorgio Cunto, senior economist at the consultancy, explained that the incipient fiscal discipline and the reduction of the State, added to a policy of exchange containment, are some of the factors that contribute to the increase in inflation in Venezuela.
«Is another hyperinflationary episode coming? Right now we can see a reboundshowing that in the last week the inflationary figures have been among the highest in a while, also compared to the figures for the region,” he said.
He highlighted that the exchange rate had an increase of 390%, which implies a depreciation of the Venezuelan currency of around 80%.
«You can already talk about inflation in dollars. Despite being a more stable currency, the prices that we have been measuring on a weekly basis are up almost 2% week-on-week. Much more than what is seen in the countries of the region,” said Cunto.
A piece of data based on Ecoanalítica’s calculations indicates that in December 2022 $397 was needed to buy the same thing that could be bought with $100 in December 2018.
Diego Santana recalled that the factors that revitalized the consumption of Venezuelans were the greater imports, the ease of financial transactions and the greater income and remittances.
Regarding remittances, they project that in 2023 reach $3,500 on average, a figure higher than that of 2022 of $1,500, however, the estimated amount for this year is similar to that of 2013.
Santana explained that imports grew due to the appreciation of the exchange rate, while informal dollarization facilitated transactions and the slight recovery of wages in the private sector raised income. He warns, however, that there are important changes in the consumption patterns of Venezuelans.
«He is prioritizing essential expenses, since more than 50% of his expenses go to the purchase of food. Other of his biggest expenses are for the payment of gasoline, purchase of medicines and for the passage on public transport.
Ecoanalítica recommends minimizing risks
Jesús Palacios, senior economist at the Ecoanalítica consultancy, stressed that at the end of 2022 the “slowdown” of the Venezuelan economy began, for which reason he recommends that companies study the consumption patterns of the population (frequency and type of consumer) to minimize the risks.
“Market studies are key to setting up a conquest plan” and the perfect radar to measure your competition and your position with respect to it. It is not a matter of running and chasing the consumer, it is a matter of understanding how he behaves, what he suffers, what it costs him to make ends meet and where along the way we are important to him,” he said.
Similarly, Palacios pointed out that process automation, the use of Big Data, Artificial Intelligence (AI) and staff training are part of the evolution and improvement that companies require to achieve competitiveness.
The six instruments to evaluate:
1.- Design a solid currency hedging strategy
2.- Understand consumption patterns
3.- Optimize working capital
4.- Studies of feasibility
5.- Advices tax
6.- Studies market
Post Views: 1,094
