Country Report Venezuela June 2009

Outlook for 2009-10

• A clampdown on anti-Chavez politicians will reinforce long-standing divisions in the opposition and stymie potential leaders, hampering the opposition's efforts to make gains at the December 2010 legislative election.
• A reluctance to address the structural weaknesses underlying the public finances will curb the government's ability to arrest the deterioration of the fiscal balance and cushion the impact of the economic downturn.
• An upward revision to our oil price forecasts will result in a weaker than expected contraction (we now expect real GDP to fall by 4.1% in 2009 and 2.7% in 2010, compared with 5.5% and 5.4% previously).
• Tighter import restrictions, the gradual upward adjustment of some fixed prices and the monetisation of the fiscal deficit will result in an increase in inflation during the second half of 2009, reversing the fall of recent months.
• Weaker oil prices will virtually wipe out the large current-account surplus in 2009. Assuming a pick-up in oil prices in 2010 and falling import volumes, the current-account surplus will pick up moderately in 2010.

Monthly review

• The president has increased pressure on Globovision??