The cumulative decline of the Venezuelan economy since 2013 will reach 65 percent, among the deepest five-year contractions around the world over the last half century, the International Monetary Fund said Monday.
Alejandro Werner, director of the IMF’s Western Hemisphere Department, said the Venezuelan decline is historic because it is unprecedented in the hemisphere and also because it is the only one among top global five-year contractions that is unrelated to armed conflicts or natural disasters.
The IMF adjusted its 2019 forecast for the South American country to a contraction of 35 percent rather than the 25 percent decline expected back in April due to a sharp fall in the oil production, which has already plunged to its lowest level in seven decades.
Werner said the inflation forecast for 2019 has also been adjusted downward from the 10 million percent expected in April to below 1 million because of a recent increase of the legal reserve ratio imposed on local banks by the Venezuelan Central Bank.
Venezuela economic contraction shows up in the third position globally, only surpassed by Georgia and Libya, which is at the top with an 80 percent contraction during the period 2010-2015.
Werner said the IMF expects the economy of Latin America and the Caribbean as a whole to grow 0.6 percent in 2019. But if the calculation is done for the rest of the region while excluding Venezuela, the regional average of projected growth is 1.3 percent.
“This reflects the big challenges the region faces in order to establish a process of sustainable growth,” Werner said in a news conference.
Werner said Venezuela’s prolonged crisis could push the migration from the country up to 5 million people by the end of the year. He said that exodus has meant a slight economic bump for host countries such as Colombia, even after the investment needed to support 1,5 million migrants.
The migration flow “has placed on the Colombian government the need to relax its fiscal goals and increase public spending in order so support this population,” he said. “It generates a positive impact on the economic growth.”
Werner noted that the Central Bank of Chile had cited immigration from Venezuela and other countries as one of several reasons to increase its economic growth estimates.
Werner said the effect can be positive as long as the migrants bring skills demanded by the local labor market, though it also depends on the strength of the public finances in each country.