After a complete breakdown of the Democratic System in Venezuela they are definitely one of the world's worst economies. They are currently in their third year of a recession and are predicted to stay in this recession until 2019, this year they are also expected to have around -10% GDP growth this year. With one dollar today being able to get you 1,262 Bolivars their inflation is expected to rise 475% while the prices of goods are skyrocketing. A big reason for all of this is that their oil is not selling, which makes up about 95% of their exports. They have not kept up with the maintenance on their oil facilities and also have neglected to pay the companies that extract their oil for them. Their food shortages were also severe earlier this year going months without basic things such as milk, eggs, bread and cheese, only recently have they lifted the ban food imports and price controls which is putting food back on the shelves, although these prices are so high Venezuelans can't afford it. Another reason for their falling economy is that they are literally running out of cash, to pay off their debt to Switzerland this year they shipped them gold bars. Their economy is so bad even China, who has long been their ally and helped them financially, has stopped lending them money. Overall this can not be good for intertanital trade and markets since their currency and goods are so overpriced.
http://money.cnn.com/2016/10/25/news/economy/venezuela-breaking-point/index.html?iid=SF_River
Venezuela is in a lot of trouble with the state of their economy. Their future is looking worse and worse everyday. Their inflation increases have been astonishing, and it is looking even worse for the future. It will be interesting to see if someone decides to step in and help Venezuela out, as they provide a good source of oil.
ReplyDeleteCollapse is imminent, but the question is will the world's greatest powers watch? Someone needs to step up and help, but whose's it going to be?
ReplyDeleteWill the impact on whoever aides Venezuela impact them as similarly as firms impacted by acquisitions in the stock market? If so, this is a big undertaking and can only be buffered by a leading economic superpower. It will benefit them in the long run however, and could even have long term benefits to US's trade balance.
ReplyDeleteVenezuela is in its third year of recession, but what can they do to get out of it? It's not like they can just inject cash into the money supply because inflation will just increase and it's already so high that they'd have to inject billions to make a huge impact. The value of the Bolivar has just dropped by a crazy amount in a short amount of time. They desperately need to diversify their risk and hopefully find a money maker that is not oil for them. I thought the IMF would help, but it's unsure what will happen...
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