Venezuela’s unemployment rate is soaring to levels unseen in the world since the Bosnian war came to an end more than two decades ago, according to the International Monetary Fund.
Joblessness will reach 44.3 percent in 2019 and will slam nearly half of Venezuela’s labor force in 2020, the IMF said in its World Economic Outlook published on Tuesday. Bosnia and Herzegovina’s joblessness was 50 percent in 1996, immediately after its 3 1/2-year domestic war, according to the multilateral’s database.
The Venezuelan depression is among the deepest economic catastrophes ever suffered by a nation outside of wartime. This year alone, the Andean nation’s output will shrink by a quarter -- the most worldwide since the 2014 start of the Libyan civil war, according to the IMF. The contraction has become so large that it’s generating “sizable drag” on growth not just in Latin America, but also in emerging markets as a whole.
Many businesses and shops remain closed in what once were the busiest commercial districts of the capital, Caracas. Inside the Sabana Grande and Las Mercedes neighborhoods, few people wander into shops whose shelves are either completely empty or packed with a single product. Bare-bones staff can hardly weather the shortages and hyperinflation; at today’s rate, an employee’s monthly minimum wage of 18,000 bolivars ($5.50) isn’t enough to afford a McDonald’s Happy Meal.
An index tracking employment offers in the country fell 42 percent in March compared to the same month a year earlier, according to consultancy Econometrica.
With Venezuela weighing down the region’s output, plus a weaker outlook for both Brazil and Mexico, the IMF lowered its 2019 growth forecast for Latin America and the Caribbean to 1.4 percent, from 2 percent previously.
In the two largest Latin American economies, weak activity and subdued inflation mean the Brazilian and Mexican central banks can maintain accommodative monetary policy, the IMF said, adding that in Mexico there is “scope to cut rates if needed.”
A nugget of positive news came for Argentina, currently under an IMF agreement for a record $56 billion credit line. The fund expects the country’s recession to be smaller than previously estimated in 2019, with growth resuming in the second half of the year on the back of firmer disposable income and a post-drought rebound in agricultural output. Further, Argentina’s financial stabilization and recovery mean medium-term growth accelerating to some 3.5 percent and contributing to stronger regional growth, the report said.
Still, downside risks are notable and, should they come about, may prompt a shift in investor preferences away from peso-denominated assets that could put pressure on the Argentine currency.
“Continued implementation of the stabilization plan under the IMF-supported economic reform program is crucial to shore up investor confidence and restore sustainable growth,” the report said. “To this end, meeting the primary fiscal balance target of zero in 2019 and 1 percent of GDP in 2020 is essential to bring down financing needs and avoid reigniting liquidity pressures.”