Economy
The Venezuelan government at the end of the first quarter of 2009 acknowledged the effects of global financial crisis on revenue, thus leading to a reduction in the official budget. However, in the second half, rebounding oil prices allowed the Executive branch of government to continue expanding public spending and reach the level recorded in 2008.

When designing the allocation for 2009, the authorities argued that the official budget was governed by the principle of austerity. Therefore, it was estimated at USD 77 billion, which was 13 percent below total public spending in 2008. Then, following an adjustment made in March, the fall in real terms was 17 percent. In this context, the Executive branch of government the reference oil barrel for the official budget at USD 40 and dealt with the income gap by contracting more debt and increasing the Value Added Tax (VAT) rate.

However, limitations lasted only three months. When oil began to exceed USD 50, expenditures increased.

Increased government burden, set forth under legal frameworks, hampered the overall adjustment of spending. In addition, faced with increased obligations, in June the government's disbursements began to soar.

With the use of the surplus of 2008 and the special contribution from the domestic oil industry, at the end of November the budget reached USD 88 billion. This level is similar to the allocation of 2008, which was USD 89.5 billion amidst booming oil prices that year, when the Venezuelan oil average price was USD 86.

However, the increase in the official budget for 2009 comes under conditions that are different from other periods. A report published by Banco Mercantil notes that the increased spending comes at a moment when regular tax revenues are 12 percent lower compared to 2008, the fiscal contribution from the oil industry remains low and the economic downturn has had an impact on tax collection.

Less impact
Figures from the Central Bank of Venezuela (BCV) at the end of the third quarter showed a slowing economy. Exports fell 48 percent, investment fell 14 percent, consumption shrunk 4.8 percent, spending rose 2.6 percent only. Such reduction in public spending shows that inflation dilutes the effect of spending.

The budget increase, as of the second half of the year, has resulted in liquidity expanding by 20 percent, compared to 22 percent in 2008, according to figures provided by the central bank. However, the impact of liquidity on the economy was mild, due to inflation.

The report highlights that in 2009 the economy will end with a contraction, compared with a 4.8 percent growth in 2008. "Therefore, the pressure that inflation has exerted on liquidity has been greater during this period."

Mayela Armas H.
EL UNIVERSAL