OPEC Production Cuts Drags Oil Economy In Venezuela Down By 6.1% In 2009

The crude oil sector in Venezuela has suffered a 6.1% decline in the year 2009 even as he oil prices rebounded from four year lows according to the latest update from central bank said in its year-end report. The central bank blamed the economic fall on production cuts implemented by OPEC, in a context of weakness in energy demand due to the global economic crisis.

The Venezuelan economy contracted 2.9% in 2009, confirming the country`s first recession in five years, according to preliminary estimates published Tuesday by the Venezuelan Central Bank. Non-oil gross domestic product dropped 1.9%. Manufacturing activity, which has been one of the main factors driving down economic activity in 2009, dropped 7.2% in the year, while mining fell 10.2%.

The balance of payments posted an $11 billion deficit. The country`s current account posted a $12.4 billion surplus, down 66.8% against the previous year, as a result of a decline in revenue from oil exports. The decline was partly the result of a 32.7% drop in the price of Venezuela`s basket of oil products.

Venezuela`s economy grew 4.8 percent in 2008, its fifth year of expansion on the back of high oil prices. But it entered a recession earlier this year, later in the cycle than most nations affected by the global downturn.

The government is hoping for a moderate recovery in 2010, when it is likely to increase public spending on social projects ahead of legislative elections in September. Oil export revenues fell in 2009 to $57.6 billion from $89.1 the previous year, the bank said.

The last time Venezuela experienced annual contraction was in 2003, when the economy shrank 7.8 percent, due largely to a lengthy shutdown of the oil sector as part of a failed opposition campaign to oust Chavez.

The bank said Venezuela`s current account surplus fell to $12.4 billion, or 6.2 percent of GDP, in 2009, from $37.4 billion the previous year. The capital account registered an $18.9 billion deficit, versus a $24.8 billion 2008 deficit. The balance of payments registered an $11.0 billion deficit, equivalent to 5.5 percent of GDP, the report said.

Source : Capital Market
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