Venezuela inflation topped 30 percent in 2008

Central bank: Inflation in Venezuela reaches 30 percent in 2008

CARACAS, Venezuela (AP) -- Venezuela's annual inflation climbed to 30.9 percent last year -- far above the government's target of 19.5 percent, the Central Bank reported Thursday.
Prices continued their upward surge in Venezuela last year even as economic growth slowed to 4.9 percent, down from 8.4 percent in 2007 and the slowest expansion since 2003.
Monthly nationwide inflation rose by 2.6 percent in December, rising from 2.3 percent in November as consumers increased spending during the holiday season, the Central Bank said.
The government hopes to cut inflation by half this year, but analysts say that lofty goal will be difficult to reach if public spending is not drastically reduced. President Hugo Chavez has vowed not to cut heavy spending on social programs that have made him popular among the poor.

"It's unlikely that the government is going to make important spending cuts," said Pavel Gomez, an economist at the IESA business school in Caracas.

Venezuela relies on oil sales to provide nearly half the government's budget and 94 percent of exports. But the drastic falls in oil prices are putting a pinch on Chavez's spending ability.

Some analysts expect Chavez may eventually be forced to devalue the currency, the bolivar, which is now fixed at 2.15 to the dollar. But Gomez believes the government will first try to introduce new taxes.
"If oil prices remain below $45 during all of 2009, the government is going to be thinking about a devaluation at the end of the year," he said.
A devaluation would allow officials to squeeze more bolivars out of each petrodollar, but the measure also would boost what already is the highest inflation rate in Latin America.

[Why ForexGen]


1. Lowest spreads in the market with 0-1 pip spread in 10 pairs, no commissions, no swaps and instant account Activation.
2. Scandinavian quality with Swiss precision, funds secured and local agents in 18+ countries.
3. ForexGen offers Forex trading in the major currency pairs and crosses.
4. Low capital start, with $250 as a minimum account size.
5. Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.
6. [ForexGen] offers a free trial Forex [demo account] that allows you to test your skills and practice without risking real money.