The International Monetary Fund (IMF) is projecting a surge in inflation to 1,000,000 percent by end of 2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000s.
According to Alejandro Werner, head of the IMF’s western hemisphere department Venezuela remains stuck in a profound economic and social crisis.
Werner, who released a report on Latin American region Monday said real GDP in Venezuela is projected to fall by about 18 percent in 2018, representing the third consecutive year of double digit declines in real GDP driven by a significant drop in oil production and widespread micro level distortions on top of large macroeconomic imbalances.
“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 said.
Venezuela’s economic activity is in a state of collapse with hyperinflation and increasing deterioration in the provision of public goods such as health care, electricity, water, transportation, security as well as shortages of food at subsidized prices. All of which have resulted in large migration flows, and will in turn lead to intensifying spillover effects on neighbouring countries says the IMF director.