Venezuela expects economy to shrink 10.7 percent-- Oil strikes, conflicts over Chavez government fuel losses

Saturday, June 21, 2003 Posted: 2340 GMT (7:40 AM HKT)

CARACAS, Venezuela (CNN-Reuters) -- Venezuela's government said Saturday that it expects the economy to contract by 10.7 percent this year, a bleaker outlook than previously forecast and one of the worst in the history of the world's No. 5 oil exporter.

Finance Minister Tobias Nobrega told Reuters in a telephone interview that the government estimates a 10.7 percent slide for 2003, with a contraction in the second quarter and signs of recovery during the rest of the year.

"This is a preliminary figure, and much depends on the second quarter and ... on the execution of spending and investment and public spending," Nobrega said.

He had previously forecast an 8.9 percent contraction.

Venezuela's economy shrank by 8.9 percent last year and nearly 30 percent in the first quarter of this year after a two-month opposition strike against President Hugo Chavez severely disrupted vital oil output and shipments.

Most analysts paint a more pessimistic picture as conflict over the government of populist Chavez is expected to continue to undermine the economy. The International Monetary Fund forecast Venezuela will post a 17 percent economic contraction this year.

The government has said currency curbs and price controls on basic goods will not be lifted soon. Private business leaders say the controls are sinking the economy deeper into recession by limiting access to dollars needed for imports and external debt payments.