Venezuela was able to break the four – year high inflation cycle, one of the largest in the world, as the government slowed the printing of money and the US dollar became the preferred currency in the country.
According to Bloomberg, prices rose 7.6% on a monthly basis in December, which was less than 50% of monthly inflation for a full year, which most economists generally use to define high inflation. On an annual basis, Venezuela closed 2021 with inflation at 686.4%.
“Venezuela’s hyperinflation is gone,” Ronald Balza, a professor of economics at Caracas Catholic University, said Friday.
“The government did not take action and stopped inflation.”
According to Luis Oliveros, a professor of economics, the decline in printing was due to the budget deficit being reduced to less than 10% of GDP last year, from about 30% of GDP when inflation began in late 2017. At Central University in Caracas.
Unofficially accepted the US dollar
Instead of the national currency, the bolivar, the country unofficially adopted the US dollar. More than 60% of all transactions are made in US currency.
“While inflation is still significant in Bolivar, it does not capture all the information about what’s happening in prices,” Oliveros said.
“We need to focus on the dollar price.”
Despite emerging from high inflation, the country still has one of the highest inflation rates in the world.
While official government figures in Venezuela are unreliable, a parallel inflation index compiled by opposition lawmakers also showed a significant easing in prices last year.
The Bloomberg Cafe Con Lech Index – which tracks the price of a cup of coffee in Caracas on a weekly basis – shows that the increases are minimal.
