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Venezuela's Economic Crisis - PDF

   

Added on  2020-02-18

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1VENEZUELA’S ECONOMIC CRISISStudent’s NameCourseDate
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2IntroductionFrom the start of past one decade till 2014, Venezuela profited from booming oil prices an occurrence that facilitated increased public expenditure on ambitious schemes. However, the decline in global oil prices from 2014, along with insufficient micro and macroeconomic policieshave considerably impacted Venezuela’s social and economic performance. This country with the leading crude oil reserves globally is currently encountering one of the severest social, political and economic crises. The shops and supermarkets in this country lack adequate essentialproducts like medical and food supplies. Moreover, the failure of the leadership of Venezuela to accumulate savings during oil revenue boom has worsened the current economic crisis.1Therefore, this paper explores reasons behind the current Venezuela’s economic downturn. 20062007200820092010201120122013201420152016-20020406080100120Venezuela's economic outlookGDP growth (Annual %)UnemploymentInflation (Annual %)%Figure 1: Data extracted from the World Bank1—. "The World Bank In Venezuela ." 2016. http://www.worldbank.org/en/country/venezuela/overview (accessed September 3rd, 2017).
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3Causes of Venezuela's Economic DownturnDecline in Global Oil PricesHeavy reliance on oil revenues has made Venezuela’s economy to be highly exposed to external shocks. Oil accounts for approximately 95% of Venezuela’s export income and 25% of its Gross Domestic Product. Therefore, as global oil prices declined from 111 U.S Dollars per barrel in 2014 to 27 U.S Dollars per barrel in 2016, the economy of this country contracted significantly.2 In 2014, the economy contracted by 3.89% and 10% in 2016. Figure 2: Retrieved from Cable News Network (CNN)Economic MismanagementThe government’s decision to take a bigger role in managing of the country’s oil production has resulted in a drop in foreign investments and consequently a decrease in oil 2Council on Foreign Relations. Venezuela in Crisis. August 1st, 2017. https://www.cfr.org/backgrounder/venezuela-crisis (accessed September 3rd, 2017).
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