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Venezuela Country Risk Report Q1 2019

Venezuela Country Risk Report Q1 2019

Venezuela's economic and political crisis will stretch into a sixth year in 2019 Declining oil production, hyperinflation and a poor business environment will keep the economy in a deep depression

The administration of President Nicolás Maduro will stoke further inflation through expansionary fiscal policy and continue to work to isolate the political op-position A raft of economic reforms will do little to halt the crisis, and in some cases will make matters worse

Hyperinflation and a general loss of confidence will keep severe depreciatory pressures on the bolívar, ensuring that the parallel market value of the currency remains weak, despite a recent devaluation and re-denomination of the currency

Political risk will remain extremely elevated due to severe shortages of essential goods and failing public services, which underpin regular unrest, and the insti-tutional crisis between the opposition-controlled legislature and PSUV-controlled executive and judiciary The installation of the supra-legislative constituent assembly has exacerbated this issue, as has Maduro's re-election victory in May 2018 in a vote the opposition viewed as illegitimate

The country defaulted in November 2017, and has since accumulated more than USD7 0bn in arrears Creditor action is a real possibility in 2019, namely the acceleration of principal payments and attempts to seize Venezuela's external assets, including oil shipments

Key Risks

The chances of a military uprising against the regime remain substantial, given the collapse in living conditions in the country A thwarted coup in May and as-sassination attempt against Maduro in August underlines this threat

Maduro is increasingly likely to remain in power past 2018, relying on a combination of purges, patronage, a fractured opposition and mass outmigration from the country This would have a decidedly negative impact on the country's economy, given the PSUV's track record of economic mismanagement

The US has threatened to impose sanctions on the Venezuelan oil sector, potentially cutting Venezuela off from its largest export market Venezuela Country Risk Q1 2019


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Venezuela In The Midst Of A Depression, With Risks To The Downside
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Venezuela's Massive Current Account Surplus To Flip Into Deficit In 2019
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS EXPORTS
TABLE: TOP 5 GOODS IMPORTS
Monetary Policy
Hyperinflation Continues In Venezuela, Despite Currency Re-Denomination
TABLE: ESTIMATES OF VENEZUELAN INFLATION
Fiscal Policy And Public Debt Outlook
Massive Fiscal Deficit In Venezuela To Expand Further In 2019
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURES CATEGORIES
Currency Forecast
Venezuelan Bolívar Remains On A Depreciatory Trajectory
Venezuela Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Venezuelan Economy To 2027
Structural Weaknesses Underpin Poor Long-Term Growth Outlook
TABLE:.LONG-TERM.MACROECONOMIC.FORECASTS
Political Outlook
Domestic Politics
Massive Governance Challenges Await PSUV's Successor In Venezuela
Long-Term Political Outlook
Venezuela's Political Crisis: Four Scenarios
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE:.TARIFF.AND.NON-TARIFF.TRADE.BARRIERS
TABLE: FREE TRADE AGREEMENTS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Continued Growth Divergence And Policy Risks Ahead
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: VENEZUELA – MACROECONOMIC DATA & FORECASTS

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