WASHINGTON – The International Monetary Fund's (IMF) Director of the Western Hemisphere Alejandro Werner has revealed that Venezuela's inflation was 275% in 2015 -- the highest in the world. Worse for the beleauguered Latin American nation, Werner says that inflation this year will probably come in at 720%.
"A lack of hard currency has led to scarcity of intermediate goods and to widespread shortages of essential goods—including food—exacting a tragic toll," says Werner. "Prices continue to spiral out of control, and we expect inflation to rise to 720% this year, from a world-high inflation of about 275% in 2015."
Last week, the Venezuelan government -- which had not released any inflation figures since last year, suddenly released figures that sought to show inflation was 141% to September 2015. Digging down into the numbers, the Latin American Herald Tribune (LAHT) found that the government had changed its inflation methodology to try to overweight certain items in their pricing control even further in their calculations.
But the astounding inflation numbers are just one of the problems that Venezuela is facing, says the IMF.
"In Venezuela, longstanding policy distortions and fiscal imbalances were already having a deleterious effect on the economy before the collapse in oil prices," says Werner. "These problems worsened as falling oil prices triggered an economic crisis, with an expected fall in output of almost 18% over 2015 and 2016 (the third sharpest decline in the world)."
Argentina, Ecuador and Brazil will join Venezuela in recession in 2016 and the economy of the wider Latin American and Caribbean region will shrink by 0.3 percent for the second consecutive year, the International Monetary Fund also says.
In its latest Regional Economic Outlook, the IMF forecasts contractions of 1% in Argentina and 8% in Venezuela. Venezuela already suffered a 10% decline in 2015, for a total 2 year collapse of 18%.
The IMF anticipates a relatively mild downturn in Ecuador.
Despite global headwinds, the economies of Colombia, Chile and Peru will grow by between 2 percent and 3 percent, according to Werner.
“It’s been a rough start to 2016, as seen by the recent bouts of financial volatility, stemming from uncertainties related to the slowdown in China, lower commodity prices, and divergent monetary policy in advanced economies,” he said.
The IMF says the overall outlook for Latin America and the Caribbean outlook obscures significant sub-regional differences.
“While South America is heavily affected by the decline in commodity prices, Mexico, Central America, and the Caribbean are beneficiaries of the strengthening U.S. economy and, in most cases, of the oil price decline,” Werner said.
Mexico’s GDP will grow roughly 2.6%, while Central America and the Caribbean will expand by 3.9%, according to the latest IMF estimates.