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Endowed with the largest oil reserves in the world (302,807 billion barrels in 2017, according to OPEC), Venezuela is largely dependent on fluctuations of the oil prices (which represents 96% of exports). The Venezuelan economy has been hit hard by the drop in oil prices. The IMF foresees a decline of the GDP of 18% in 2018, followed by a decline of 5.0% in 2019 and 2.0% in 2020 (the country’s Central Bank has not published data on the GDP since 2015).
The industrial activity continues to suffer from insufficient diversification and difficulties to import intermediate products. The policy of redistribution of the petroleum manna through social measures was impeached by the weakness of the oil prices, in strong decline since 2012. This reinforced the macro-economic imbalances that Venezuela suffers from. The households’ consumption and private investment were weak in 2018. Inflation was as high as 1% in 2018 and according to the IMF predictions, is supposed to reach 10% in 2019. This trend, paired with the fall of the national currency’s value, the bolivar, only helped to worsen the economic situation. The debt rose to 159.0% of the GDP in 2018, and should grow to 162.5% of the GDP in 2019 (IMF estimates). Venezuela suffers from a commercial imbalance despite the decrease of imports, which is linked to the lack of competitiveness of the industrial sector.
Different sectors in Venezuela
The agricultural sector represents 5.0% of the Venezuelan GDP (World Bank) and employed 10% of the active population in 2018. The main agricultural products of the country are corn, soy, sugar cane, rice, cotton, bananas, vegetables, coffee, cocoa, beef and pork meat, milk, eggs and fish. Venezuela enjoys important natural resources: petroleum (main natural resource), gas, gold and silver mines, bauxite and diamonds. According to the OPEC’s 2018 annual report, the country’s proved resources in petroleum would reach 302,809 million of barrels which puts it at the first place in the world in front of Saudi Arabia. Actually, despite a continuous decline of the petroleum production in 2017 (reaching in March 2017 its lowest level in 30 years), the country remains largely dependent on revenue from petroleum, which accounts for nearly all of its earnings from exportation and for almost half of the government’s revenue.
The industrial sector represents 37.2% of the GDP and employs 23.56% of the active population in 2018, according to the data from the World Bank and the IMF. The main industrial activities are petroleum (controlled by a State company, petroleum represents the first natural wealth of the country with nearly 50% of the national wealth), construction equipment, food, textile, iron, steel, aluminium and engine parts assembly. Because of state control of currency and prices, local industries have encountered difficulties to acquire the necessary goods to maintain operations or to sell goods with profit on the local market.
The service sector represents 52.6% of the GDP and employs 66.45% of the active population in 2018. The service sector is a major source of revenue and jobs. The sector includes banking and finance, real estate, education, medicine, governmental agencies, hotels and restaurants, as well as entertainment. Together, these activities represent more than two thirds of the total employment in Venezuela.