Venezuela's economy to bounce back soon - official

Venezuelan President Hugo Chávez's top economic adviser predicted Sunday that Venezuela's oil-dependent economy will begin within several months to emerge from its worst recession in years.

Planning Minister Jorge Giordani said the economy should begin to grow again by year's end, bouncing back after contracting for five straight quarters.

He said efforts aimed at curbing double-digit inflation would begin to have an impact next year.

"There's no doubt that it will recover in the third or fourth quarter of 2010, and it's going to continue recovering next year," Giordani said during an interview broadcast on the local Televen television channel.

Venezuela's economy shrank 3.5 per cent during the first half of 2010 compared to the same period a year earlier.

It contracted 1.9 per cent in the second quarter, dragged down by a 2.0 per cent decline in the oil sector and a 1.8 per cent decrease in the private sector.

Economic output fell 3.3 per cent last year.

Government officials blame the recession on lower petroleum prices and lingering effects of the world financial crisis. Venezuela's economy is highly reliant on oil sales, which account for 95 per cent of the country's export earnings.

Critics blame the government's socialist-oriented economic policies, coupled with reduced consumer demand and stagnant investment.

Strict foreign exchange controls that limit the amount of US dollars available to businesses, which need hard currency to import raw materials and retail goods, are also hampering growth, critics argue.

"The economy is not undergoing any kind of recovery," said Robert Bottome, editor of the local Veneconomy business newsletter.

Bottome said he doesn't see any possibility of a rebound next year because "none of the policies that are discouraging investment are going to change, and there's no indication that oil prices are going to rise significantly."

The lack of dollars needed for imports and South America's highest inflation rate that is pushing up costs for businesses are undermining any opportunities for growth, he said.

"They are forced to work with one hand behind their backs," Bottome said of local businessmen.

Opposition leaders are telling Venezuelans ahead of this month's legislative elections that the economy won't emerge from the recession unless Chavez - a close ally of Cuba's Fidel Castro - abandons the drive to transform Venezuela into a socialist state.

Inflation topped 25 per cent last year despite government price controls on many foods and basic goods, and prices are already up 30.5 per cent this year.

Giordani said he expects inflation to slow next year, but offered no specific figures.

Bottome took issue with the planning minister's prediction, saying he expects inflation to end this year near 40 per cent and consumer prices to be similarly elevated in 2011.

Venezuela has not seen such difficult economic times since 2003, when the economy contracted 26.7 per cent in the first three months of that year as the country struggled with the effects of a months-long strike that crippled its all-important oil industry.

The government had set a goal of economic growth between 0.5 per cent and 1.0 per cent this year, but analysts are predicting the economy will shrink more than 2.0 per cent by year's end.

- AP

Venezuela's economy to bounce back soon - official