MACROECONOMICANALYSIS :VENEZUELA

MKT# 221

T E A ML I F E L E S S

MEHEDI HASAN RIAD

MD SHOURID ZAMAN

MIR MD BONYEYAMIN

MOIN TALUKDER

TARANA MAHZABIN

NAILA SHARMIN

Venezuela is a country on the northern coast of South America with diverse

natural attractions.The economy of Venezuela is largely based on the

petroleum sector and manufacturing. Revenue from petroleum exports

accounts for more than 50% of the country's GDP and roughly 95% of total

exports. Venezuela is the fifth largest member of OPEC by oil production. From

the 1950s to the early 1980s the Venezuelan economy experienced a steady

growth that attracted many immigrants, with the nation enjoying the highest

standard of living in Latin America. During the collapse of oil prices in the

1980s the economy contracted, the monetary sign commenced a progressive

devaluation, and inflation skyrocketed to reach peaks of 84% in 1989 and 99%

in 1996.

ECONOMIC PROFILEOF VENEZUELA

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OVERVIEW OF THEECONOMY

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GDP $515.1 billion & GDP growthrate is -5.7 (where Bangladesh hasgot +6%)

It has an inflation rate of 500% whichis expected to exceed 700% this year

It has a fixed exchange rate

80% of its population leave belowthe poverty line

It has a growing unemployment rateof 17% which is approximately 3xmore than Bangladesh

Known as the worlds worst economy

GOINGTHROUGH ASEVERE

FOOD CRISIS

GROWINGPOLIT ICALINSTABIL ITY

AND THE ECONOMY HAS GONE FROM BAD TO WORSE TOHORRIFIC

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HYPERINFLATION MAKING THESITUATIONWORSE

WHAT’S BEHIND THE ECONOMIC CHAOSIN VENEZUELA

Venezuela’s sole dependency on oil as a profitableexport

Venezuela’s uni-polar political system

Unsustainable economic policies

Venezuela’s dependency on water as its primaryelectricity source (as it is going through a long termdrought for nearly 3 years) resulting in decreasedproduction period due to insufficient electricity supply.

In Venezuela, inflation is Usain Bolt and the government isakin to a middle-aged man running in steel toe boots,with Achilles tendinitis and a bum knee.

YEAR OF ITS

RECESSION

3rdThe Inflation Trend

over the past years

2007

500%

2016

2017

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apprx.2200%

Source: Business Insider & The Economist & Wkipedia

200%

Currently is in

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With the short supply of foreign currencies and Venezuela's reliance on

imports, debt is created. Without settling the outstanding debt, Venezuela

could also not import materials necessary for domestic production. Without

such imports, more shortages could be created since there would be a

larger lack of production as well

PUBLIC DEBT: 51.4% OFTOTAL GDP RESULTING IN LOW PRODUCTION

In terms of foreign trade, oil accounts for 96% of Venezuelan export earnings. Persistentlylow oil prices together with declining production, a result of low investment, are going tocontinue to impact on the current account balance in 2016.

As oil products are also the second largest item in Venezuelan imports because of theinefficiencies of its local refineries. The lack of competitiveness of the almost non-existentmanufacturing sector is another factor inhibiting the growth of non-oil exports.

FDI is at a very low level because there is uncertainty about the country's legal frameworkand recourse to bilateral loans cannot restore the balance of payments, leading to a declinein its reserves and the soaring of US dollar on the parallel market.

ThankYou

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