Economic Analysis


Population 30,620 million
GDP per capita 8 494 US$
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major macro economic indicators

  2014 2015  2016 (f) 2017 (f)
GDP growth (%) -3,9 -6,2 -10,0 -4,5
Inflation (yearly average) (%) 62,2 121,7 475,8 1 660,1
Budget balance (% GDP) -16,8 -23,1 -25,7 -26,1
Current account balance (% GDP) 1,7 -7,8 -3,4 -2,5
Public debt (% GDP) 63,5 41,5 32,8 28,2


(e) Estimate (f) Forecast


  • Significant oil reserves along the Oronoco river and potential offshore gas fields
  • Assets (including in the United States) of the State oil company, PDVSA
  • Growing active population  


  • Economy heavily dependent on oil and gas sector and loans from China   
  • Critical risk of default on external debts   
  • Escalating political instability 
  • Hyperinflation
  • Inefficiency of PDVSA State-owned oil company  
  • Opaque and informal management of oil and gas revenues  
  • Shortages of currency and goods  


Economic and food crisis

The recession in the Venezuelan economy will continue in 2017. Inflation is rising and is expected to reach 1.660%.The government largely finances its huge deficit by issuing currency. The lack of foreign reserves and the inefficiency of price controls also contribute to inflation, supporting the black market.

Oil accounts for over 90% of the country’s exports, and 50% of budget revenues, which shows the economy’s lack of diversification. Its production has declined driven by the chronic shortfall of investment and skills, the squeeze of the profits of the state-owned company PDVSA by the government and the non-payment to foreign service providers.

The contraction in oil revenues in recent years and the need to import more refined products to offset refinery problems, led to a serious shortage of foreign currency. Therefore imports of basic goods, such as food, medicines and hygiene products, have also been extremely impacted. The country is also facing a disorganization of its industrial production and distribution, exacerbated by power cuts. The economic crisis seriously affects the population’s health: between 2015 and 2016, infant mortality has increased by 30%; 85% of basic medicines are facing shortage and many hospital services can no longer operate.


Extremely worrying budgetary and external vulnerabilities 

The public accounts are weakened: after a slight easing between 2015 and 2017, the huge public deficit will rise again in 2018. Public spending has not been reviewed in the light of oil price developments.

The current account deficit may worsen from 2.4% of GDP in 2016 to 3.3% in 2017. The slight increase in oil prices this year would be beneficial for exports, although a part of oil production is allocated to the debt repayment to China. Moreover, import control will continue to be necessary in the context of substantial repayments of external debt, in particular for PDVSA. International reserves declined by 20% YoY in mid-May 2017, and by 8.4% since January. Although the authorities seem to be determined to meet their commitments, the default risk remains extremely high. In May, Goldman Sachs paid just 865 million dollars in the secondary market for PDVSA´s bonds valued at 2.8 billion dollars.  This is compounded by the liquidity risk, as a large part of the national reserves are held in gold.

The exchange system with two rates, including one for basic necessities, is under pressure, and even if further devaluations are expected in 2017 and 2018, exchange rates will remain overvalued.


 Bloody political crisis

The political situation in Venezuela is more and more tense. The political quarrels between the opposition coalition, the Democratic Unity Roundtable (Mesa de la Unidad Democratica, MUD), which has a majority in Congress, and the government of Nicolás Maduro (PSUV), who is supported by the army and a part of the population, leads to a constitutional deadlock. More than 70 people died and hundreds have been injured during the street clashes between demonstrators and the security forces; 155 civilians have been incarcerated after having been tried by military courts. The government falls back on militia and convoked a constituent assembly. One third of its members will be hand-picked by social groups, removing the current deputies. This assembly should rewrite the Constitution before the upcoming elections, to be held in December 2018.

Because of the economic crisis, the crime rate has increased in the whole country, in particular in Caracas which became one of the most dangerous cities in the world. This contributes to the growing exodus of Venezuelans to Colombia or Brazil.

The country is increasingly isolated after its withdrawal from the Organization of American States and its suspension from Mercosur. The Petrocaribe association seems to be definitely dead, which diminishes the influence of Venezuela in the Caribbean. On May 18, 2017, Washington launched sanctions against eight members of the Venezuela’s Supreme Court of Justice. However, the country still has good relations with its main creditors, China and Russia.


Last update: June 2017

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