Boston, MA -- (SBWIRE) -- 05/26/2014 -- We expect economic growth to remain sluggish, characterised by a slowdown in private consumption, net exports, and investment. President Nicolas Maduro has consolidated his power in recent months, bolstered by a strong PSUV performance in the December 8 elections, and will continue Chavez's policies of elevated social spending, resulting in sizeable fiscal deficits. However, a series of currency devaluations has begun to ease fiscal pressures.
Inflation will remain elevated, at the highest level in Latin America, and the operating environment will remain very precarious for foreign multinationals in the country.
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Major Forecast Changes
Due in part to a downward adjustment by our Oil & Gas team for crude production in 2014, we have downgraded our growth forecast for the year, from 1.5% to 1.2%.
For the second consecutive quarter, we have upgraded our Venezuelan fiscal deficit forecast for 2014, and now believe the shortfall will reach 6.5% of GDP, compared to our earlier estimate of 7.8%, due to reforms which will bolster bolivar-denominated government revenues.
Key Risks To Outlook
Upside Risks: Higher than expected oil prices and more investorfriendly policies could see real GDP growth exceed our forecast.
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