Business Forecast

Core Views

After two consecutive years of recession we believe that Venezuela will post positive real GDP growth in 2011. Petroleum-related economic activity will drive the majority of growth, but increased government consumption in the run up to the 2012 presidential election will also feature.

Inflation will remain elevated at the highest level in Latin America, and nationalisations are likely to rise.

Major Forecast Changes

We now see potential for a more unified opposition heading into the 2012 presidential elections, which increases the likelihood of a new administration beyond the 2012, although uncertainty still prevails. We have revised our inflation forecasts upwards for Venezuela owing to worse-than-expected fiscal data. We now project inflation to come in at 29.0% y-o-y by end-2011 and 26.0% at end-2012, from 5.0% and 20.0% previously.

Key Risks To Outlook

Upside Risks: Higher than expected global oil prices could boost real GDP growth and the country's fiscal outlook.

Downside Risks: Electricity supply shortages could lead to a major decline in industrial production, potentially leading to another year of recession.