Venezuela: Modest Growth In 2021, But Economy Will Face Long-Term Headwinds

• The Venezuelan economy is expected to post 0.8% real GDP growth in 2021, the first annual expansion since 2013. Economic activity contracted by an estimated 30.5% in 2020 due to the COVID-19 pandemic.
• This continued a multi-year decline, as chronic economic mismanagement, hyperinflation, a collapse in the oil sector and US sanctions had previously caused real GDP to fall by more than 75.0% since 2013.
• The forecast reflects Fitch’s view that Venezuela's economic contraction bottomed out in 2020 and will improve due to rising oil production and liberalization of economic policy. Nevertheless, real GDP will remain far below 2013 levels until US sanctions are lifted and there is a sustainable shift in economic policy in the country.
• Economic data from the Observatorio Venezolano de Finanzas (OVF), an opposition-aligned research group, show that the country has posted month-on-month growth in six of the seven months between September 2020 and March 2021, with estimates for Q221 suggesting this trend continued in more recent months. This reflects a rebound from the worst period of the COVID-19 crisis, in line with most other markets in Latin America.

(Source: Fitch Solutions)