Venezuela's economy showed clear signs of serious contraction in the aftermath of last year's power shortages brought on by a prolonged drought, the Central Bank announced.
Analysts said the contraction in the economy, already down 5.8 percent over comparable period in 2009, would likely continue in the second quarter because the power shortages worsened before rain soaked the parched land this month and started replenishing the water reservoirs.
Industry economists said Venezuela's gross domestic product through 2010 could dip as much as 7 percent — the only major Latin American nation to show contraction this year.
Low water levels in Venezuela's hydroelectric dam reservoirs greatly curtailed the operation of power generating turbines, causing blackouts that forced factories to shut down or limit production.
Earlier in May President Hugo Chavez said the return of rains would help Venezuela back to normal operations but the industry leaders said the effect of low electricity output earlier in the year would take longer to dissipate.
As power supplies ebbed with declining electricity production, government authorities introduced rationing and tough measures against "errant" businesses that were seen to be flouting cutbacks.
Losses in consumer industries have been widespread, not only because of missed production targets but also because of disruptions in transport, refrigeration and storage of perishable goods.
Although officials remained upbeat, analysts said the Central Bank figures showed Venezuela's economy was in recession.
Aside from the power shortages, Venezuela's economy has taken the full brunt of economic disincentives generated by Chavez's national measures and price and currency controls.
Industrial production dropped 9.9 percent in the first quarter after Chavez ordered 20 percent cuts in electricity. Inflation surged to a 7-year high, with prices rising 31.9 percent over April 2009, the central bank said.
In the first quarter, transportation industry declined 15.9 percent, commercial transactions fell 11.6 percent and the financial industry sector contracted 9.7 percent, the Central Bank said.
Drastic cuts in imports added to power shortages and low investment to produce those results, said the bank. Even the oil industry contracted 5 percent, more than the non-oil sector and private consumption dropped below that to 5.9 percent, the bank said.
Chavez has said he doesn't mind contraction in growth as he wants Venezuela to shed capitalist tendencies in consumption.
The government posted a current account surplus of $7.2 billion in the quarter while the capital account showed a $11.5 billion deficit. Direct investment outflow reached $3 billion as companies continued to pull capital out of the country after state takeover of companies in the steel, cement, oil and food industries.
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