Venezuela's inflationary pressure continues in May 2003
<a href=www.vheadline.com>Venezuela's Electronic News Posted: Monday, June 02, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita
VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: The Venezuelan public's purchasing power is less every day in the new circumstances of the Venezuelan economy, burdened with restrictive measures that, far from contributing to stability, perpetuate distortions that express themselves in the form of more unemployed workers and lower real salaries for those who still have jobs with every passing month.
The Consumer Price Index for the Caracas Metropolitan Area (CPI-CMA) rose 2.3% in May. Its cumulative variation in the first five months of the year reached 13.8%, higher than the 10.54% cumulative inflation rate recorded in the January-May 2002 period. Prices rose both for controlled goods and services and for those not under control. The CPI's Food and Non-Alcoholic Beverages category underwent a 6.6% acceleration and there was a 7.7% general variation, reflecting previous warnings by CENDA that the standard food basket would cost substantially more in May.
This inflationary surge was provoked by the near-total restriction of the foreign exchange market, which has prevented a free flow of goods between Venezuela and the outside world and resulted in a limited supply of goods; hence, prices have risen. Another contributing factor is the continuation of inflationary expectations stemming from fiscal considerations, in view of the low volume of tax collections and the stronger pressure posed by expanding liquidity for placement of public bonds.
The annualized inflation rate (May 2003/May 2002) came to 35%, a great deal higher than the 18.32% rate for the May 2002/May 2001 period. All signs indicate that inflation will be considerably higher this year, especially in view of the inflationary impact of a possible relaxation of the exchange controls and a deregulation of prices. Some analysts are projecting an inflation rate above 50% for the year.