Economy
December 30

Venezuelan economy slows down; purchasing power crumbles
The year-end message of the interim president of the Central Bank of Venezuela, José Ferrer, unveils a sharp slowdown in the domestic economy even though the global financial crisis has not shocked the country. 

The interim figures issued by the central bank show than in 2008, Venezuela's GDP grew 4.8 percent versus 8.4 percent in 2007, while oil revenues soared 48.5 percent, from USD 62.55 billion to USD 92.92 billion.

While the oil sector production rose 3 percent compared to a 4.2 percent fall in 2007, the non-oil sector lost momentum and grew 5.3 percent vs. 9.5 percent in 2007.

The slowdown is apparent in key areas related to production and job creation. For instance, the growth in the manufacturing sector was 1.6 percent vs. 7.2 percent in 2007; construction 6.7 percent (2008) versus 13.3 percent (2007); trade 3.8 percent versus 16.9 percent; transport and storage 3.6 percent versus 13.5 percent, while the financial sector fell 4.5 percent versus an increase of 17 percent in 2007.

The only activity that maintained the growth rate registered in 2007 was telecommunications (with a 21.4 percent growth).

Government to extend firing freeze for additional 12 months
The Executive Branch will extend once again firing freeze. Government sources said that the duration of the new presidential decree would be similar or maybe the same as the current decree.

This will be the fifteenth time that the government prohibits unfair dismissals of workers in the private and public sectors since, from May 2002, these decrees have been continuously reenacted.

Sources say that the decree of labor immobility that will be effective as of January 1, 2009, will keep the same terms than the previous ones.

This means that the measure will cover workers who earn a monthly basic salary equivalent to less than three minimum wages, which equals to VEB 2,397.69 (USD 1,115.2 at the official exchange rate).

The other terms will remain unchanged, according to government sources.

Venezuela's economy loses strength amidst oil boom
The Venezuelan economy has started to slow down even though crude oil prices, the main engine of economic growth, recorded in 2008 their highest historic levels.
 
The Central Bank of Venezuela said that in 2008 "in real terms, the price of the Venezuelan oil basket averaged, at 1973 prices, USD 15.16, exceeding the record high of USD 14.21 in 1981."
 
In fact, Venezuela's total exports, 93 percent of which are oil sales, have totaled USD 99.92 billion, amounting to 47.1 percent of the GDP, the highest value since 1970, better than the record high of 46.1 percent recorded in 1974.
 
The oil windfall has resulted in a significant increase in public spending. In the first eight months this year, central government expenditures were 40.2 percent higher than the same period of 2007.
 
However, the Venezuelan economy has slowed down sharply in 2008 and grew 4.9 percent versus 8.4 percent in 2007. As a result, public spending appears to be losing effectiveness.