Inflation in Venezuela could exceed 1 million percent by the end of the year as the country falls deeper into economic and humanitarian crises, the International Monetary Fund announced on Monday.
“We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000’s,” said Alejandro Werner, the director of the IMF’s Western Hemisphere Department.
In a blog post projecting the economic outlook for Latin America, Werner also projects that Venezuela’s real gross domestic product (GDP) will fall 18 percent in 2018, marking the third consecutive year of double-digit declines in real GDP.
Werner suggests the falling GDP is in part due to a significant drop in oil production “and widespread micro-level distortions on top of large macroeconomic imbalances.”
Data from the Organization of the Petroleum Exporting Countries (OPEC) shows Venezuelan oil productions fell to 1.5 million barrels a day in June, marking a 30 year low, even though the country has the world’s largest reserves of crude oil, the AFP reported.
“We expect the government to continue to run wide fiscal deficits financed entirely by an expansion in base money, which will continue to fuel an acceleration of inflation as money demand continues to collapse,” Werner adds.
The socialist country is currently suffering through a five-year crisis that is leaving it with a collapsed economy, hyperinflation and a complete breakdown of public goods and services, including deteriorating roads, food shortages, disturbing water cleanliness, failed electricity, high crime and a lack of adequate medicine for the sick.
The conditions in Venezuela are causing mass migration flows out of the country, Werner notes, which will lead to an intensified spillover effect in neighboring countries. (RELATED: More Than 50 Countries Urge Venezuela To Get Aid Due To Food And Medicine Shortage)
Economic growth in Brazil and Colombia, which largely surround Venezuela, are expected to exceed at moderate to favorable rates due to investment and demand for oil, the blog states.
Werner’s post is an update to the IMF’s April 2018 projections, and he says the “region is expected to grow by 1.6 percent in 2018 and 2.6 percent in 2019, up from 1.3 percent in 2017, but down from our April projections.”
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