Venezuela Continues Defeating Inflation, 1% Inflation Reported in June

Caracas (OrinocoTribune.com)—The Central Bank of Venezuela (BCV) reported that the monthly inflation fell to one percent at the end of June. Such a low inflation rate has not been seen in Venezuela for almost 12 years, since July 2012, the year with the best performance of the Venezuelan economy in the last two decades. This June inflation figure represents a drop of one third if compared to the 1.5% inflation reported last May.

In a press released published on Wednesday, July 8, the BCV explained that from January to June of this year the cumulative inflation rate was 8.9%, while in the last 12 months it was 51.4%, a historical achievement taking into consideration that from 2017 and 2020 the country suffered the worst hyperinflation crisis in modern history, mainly as a result of illegal US and European sanctions.

For 2024, the monthly inflation rate has been showing encouraging results, with the only exception of April and May when it reached 2% and 1.5% respectively.

The annualized inflation in Venezuela for the same period in 2019 was of 116,416%, one year after President Nicolás Maduro adopted a new economic policy aimed at promoting economic growth, decoupling from oil production, dismantling of price and exchange rate controls and a restrictive monetary policy that reduced the banking pressure on the foreign exchange rate system, one of the main triggers of inflation.

From 2019 onwards, the annualized inflation dropped to 2,355% in 2020, 2,508% in 2021, 157% in 2022, and 404% in 2023. This figures shows the complex reality that many Venezuelans had to suffer as a result of US aggression. According to some analysts, another factor that reduced the inflation rate was the Maduro administration’s unorthodox economic policy that abandoned years of wrong economic advise from orthodox economists that had aggravated the Venezuelan economic panorama until 2018 by not taking into consideration the external economic factors that directly impacted Venezuela’s economic performance.

This year, the largest increases for the June inflation were in food and non-alcoholic beverages with 1.5%, followed by education services at 1.1%.

Housing services contributed to lower inflation with a variation of 0.1%, restaurants and hotels 0.3%, while household equipment, housing rentals, alcoholic beverages and tobacco reached 0.4%, and transportation and leisure and culture 0.5%.

For the Latin American region, Venezuela in no longer leading the inflation scenario and instead continues to improve in comparison with its neighbors. According to the far-right news outlet Infobae, Javier Mile’s Argentina is the worst performing country in the region with accumulated inflation of 88.9% during the first six months of the year and an inter-annual inflation rate of 276.4%.

Argentina is followed by Venezuela in the second worst place and Colombia in a distant third place with a cumulative inflation of 3.78%, while the inter-annual inflation rate in Colombia was 7.16%, according to Bloomberg using May figures.

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President Maduro comments on the economy
On Wednesday, President Nicolás Maduro reported that Venezuela reached the 12th consecutive quarter of gross domestic product (GDP) growth. He also reported the 1% inflation rate for the month of June, adding that the bi-monthly inflation rate for the May-June period is the lowest in 39 years. “This is a victory against inflation,” said the incumbent presidential candidate for the upcoming presidential elections to be held in less than three weeks, on July 28.

The president said that in 2024 oil production should reach 1.2 million barrels per day, with the goal of two million barrels per day in 2025. “We must remember that in February 2019, inflation reached 344,000%, and the economic decline of those years, with the sanctions, the economy was declining, the GDP was similarly affected, shortages, long induced queues, and now the exchange rate system works perfectly and in a self-sustaining way,” President Maduro added.

Monetary policy
According to what economists call monetarism, excessive monetary liquidity—highly liquid funds including cash, notes, coinage, and current bank deposits—plays a crucial role in inflation. When there is more money in circulation than goods and services available, prices tend to rise.

According to some Venezuelan economists not aligned with Chavismo, at the beginning of 2024, monetary liquidity (M2) in Venezuela was 67.9 billion bolívars. However, the same non official sources say that in the last two weeks, it has experienced an increases, bringing M2 to 118.3 billion bolívars. However, other non-governmental consulting firms, such as Holland and Knight, explain that for the month of April the M2 increase of 27.11% should be considered modest if compared to the 49.27% reported for the same period in 2023.

Special for Orinoco Tribune by staff

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