Do readers remember the article by Andrés Oppenheimer from October 2005, which highlighted how the Venezuelan Institute of Statistics managed to reduce poverty levels after President Hugo Chávez publicly criticized a report showing an 11% increase in poverty since he took office in 1999? The article was fittingly titled “A Miracle in Venezuela?” Indeed, it seemed like a true miracle because Chávez believes he can simply command a reduction in poverty levels.
Now, the Venezuelan leader wants to apply the same socialist formula to the methodology for measuring GDP, following the Central Bank’s release of figures indicating that the country is officially in recession, with a GDP contraction of 4.5% in the last quarter. Here’s an interesting piece of information from Goldman Sachs’s Alberto Ramos:
The real economy continues to deteriorate, and symptoms of the Dutch disease (atrophy in non-tradable sectors of the economy) and stagflation are becoming more pronounced (inflation continues to accelerate despite the economic contraction in 2009). Real GDP fell 4.5% year-on-year more than expected during Q3 2009 (down from -2.4% year-on-year in Q2 2009); market consensus predicted a decline between -2.0% and -1.0%. The very poor performance of real GDP in Q3 drove a substantial year-on-year fall of 10.7% in domestic demand. Private consumption decreased by -4.8% year-on-year in Q3 (from -2.6% year-on-year in Q2), and investment spending was significantly reduced by -14.5% year-on-year (from -2.8% year-on-year in Q2). Public consumption grew by 2.6% year-on-year in Q3. Private consumption expenditure continues to decelerate as entrenched inflation (core inflation is above 36% year-on-year) erodes real disposable income, and credit growth is rapidly slowing, while investment is affected by a mix of hostile business policies.
Therefore, expect a flurry of ‘economic analyses’ from Mark Weisbrot and similar apologists, and certainly a barrage of statements from Chávez and his top aides.