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Venezuela Econ Forecasts Improve On Oil Price Rise-Credit Suisse
By Darcy Crowe
Dow Jones
June 18, 2009

CARACAS (Dow Jones)--Credit Suisse sees an improvement in some of its key projections for Venezuela's economy as oil prices are climbing, the financial firm said Thursday in a report.

Credit Suisse lowered its projection for Venezuela's fiscal deficit in 2009 to 6% of gross domestic product from its previous estimate of 7.5% of GDP.

Credit Suisse estimates that West Texas Intermediate crude will average $60 per barrel in 2009, $10 more than its previous projection.

"We estimate that for every $10 increase in the price of a barrel of WTI oil, Venezuela's fiscal accounts improve by 1.5% of GDP," the report said.

The higher oil prices mean that the country's current account will likely post a deficit of 0.5% of GDP in 2009, less than the previous estimate for a deficit of 2% of GDP.

Inflation will also continue to slow and is expected to close the year at 25%, Credit Suisse said.

The firm said that it didn't change its projection for Venezuela's economy to contract 2% in 2009, but that higher oil prices "will likely pave the way for a recovery in economic activity in the coming quarters."

The firm also said that it doesn't expect the government to devalue the currency this year, which it pegs at an official exchange rate of 2.15 bolivars to the dollar. However, Credit Suisse added that "devaluing the currency will be unavoidable in the medium term unless oil prices rebound significantly or if expenditures are cut sharply."

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