Professor Jose Ibarra of the Central University of Venezuela, poses with a pair of old shoes in a classroom, in Caracas . When Ibarra was told the repair of his old shoes cost four times his wage as a university professor in Venezuela, he expressed his outrage in a Twitter message that awoke worldwide solidarity. Photograph: Juan Barreto /Getty Images
Venezuela’s inflation will skyrocket to one million per cent by the end of the year as the government continues to print money to cover a growing budget hole, the International Monetary Fund has predicted.
The crisis is comparable to that of Germany in 1923 or Zimbabwe in the late 2000s, said Alejandro Werner, head of the IMF’s Western Hemisphere department. He forecast the economy to shrink 18 per cent in 2018 – the third consecutive year of double-digit contractions – as oil production falls significantly.
“The collapse in economic activity, hyperinflation, and increasing deterioration in the provision of public goods as well as shortages of food at subsidized prices have resulted in large migration flows, which will lead to intensifying spillover effects on neighboring countries,” Mr Werner wrote in a blog post. Venezuela has been suffering a dramatic economic collapse since crude prices nosedived nearly four years ago and authorities have refused to enact economic adjustments.
A number of price and exchange controls only added to the distortions. While hundreds of thousands of Venezuelans flee hunger and surging prices, president Nicolas Maduro has maintained that the crisis is a result of an “economic war” waged by his political opponents at home and abroad.
As the economy unraveled, authorities stopped regularly publishing economic indicators. Economists now rely on independent estimates provided by international organizations, banks and even Venezuela’s congress to track the country’s economic meltdown. Bloomberg’s Cafe Con Leche Index estimates inflation topped 60,000 per cent over the past year and is picking up speed now, posting an annualized rate of almost 300,000 per cent in the past three months. – Bloomberg.