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Venezuela Country Risk Report Q4 2018

Venezuela Country Risk Report Q4 2018

Key View:

Venezuela's economic and political crisis will stretch into a fifth year in 2018. Declining oil production, hyperinflation and a poor business environment will keep the economy in a deep recession.

The administration of President Nicolás Maduro will stoke further inflation through expansionary fiscal policy and drive escalating unrest as it isolates the political opposition. 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 USD6.1bn in arrears. Creditor action is a real possibility in 2018, 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.


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
Economic Recovery In Venezuela Unlikely Until 2020
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
Massive Surpluses A Product Of Venezuela's Economic Collapse
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP FIVE GOODS EXPORTS
TABLE: TOP FIVE GOODS IMPORTS
Monetary Policy
Venezuela's Inflation Will Remain By Far The Highest In The World
TABLE: INDEPENDENT ESTIMATES OF VENEZUELAN INFLATION
Fiscal Policy And Public Debt Outlook
Massive Fiscal Deficits In Venezuela In 2018 And 2019
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURES CATEGORIES
Currency Forecast
Venezuela Currency Changes: Q&A
TABLE: APPRECIATION TO GET UNDERWAY IN 2020
Venezuela Country Risk Q4 2018Contents10-Year Forecast
The Venezuelan Economy To 2027
Structural Weaknesses Underpin Poor Long-Term Growth Outlook
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Maduro's Long-Term Prospects Improving, Despite Venezuela's Economic Meltdown
Long-Term Political Outlook
Venezuela's Political Crisis: Four Scenarios
Global Macro Outlook
Strong Growth, But Greater Headwinds Too
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: VENEZUELA – MACROECONOMIC DATA AND FORECASTS

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