UPDATE 1-Venezuela upbeat on 2014 economy despite soaring inflation
CARACAS, Oct 22 (Reuters) - Venezuela's government on Tuesday proposed a 2014 budget based on steady economic growth and inflation slowing to around half the current rate, but the upbeat forecast contrasts with the country's current predicament of soaring prices and frequent shortages of consumer staples.
Finance Minister Nelson Merentes told the National Assembly the proposed $87 billion budget targeted GDP growth of 4 percent and an inflation rate of between 26 percent and 28 percent, versus the current 12-month rate of nearly 50 percent.
Better economic performance is crucial for President Nicolas Maduro, who faces criticism over the economy despite still enjoying support from the poor thanks to the social programs of his predecessor, the late socialist leader Hugo Chavez.
"Some people laugh," Merentes said, apparently in response to the reaction of opposition legislators after he announced the inflation target. "But the people know ... that this government knows how to solve complex problems," he said, noting that inflation had fallen as low as 12 percent one year under Chavez.
Outlays in 2014 of $87 billion, equivalent to 551 billion bolivars at the official exchange rate, would represent a 39.4 percent increase over the current year's budget, Merentes said. The National Assembly, which is majority controlled by the ruling Socialist Party, is likely to approve the budget with only minor modifications.
Economists pay little attention to this figure because much of Venezuela's government spending is done through opaque investment funds or directly by state oil company PDVSA.
The budget is based on a target oil price of $60 per barrel, though officials in the OPEC nation routinely under estimate crude prices when planning the budget because this allows them spend the money later with fewer budget restrictions.
Venezuela's basket of crude and refined products averaged $97.90 for the week ended Oct. 18.
Merentes declined to say what next year's target for oil production was, adding that it would be discussed by the congressional finance commission.
The budget also maintains the official exchange rate of 6.3 bolivars per dollar, which is fixed by the country's exchange controls, though greenbacks on the black market are now fetching more than seven times that.
Chavez's 14-year rule was characterized by liberal spending of oil revenue on programs ranging from subsidized grocery stores to a massive home-building campaign that helped him win a near-cult following and repeated elections.
But heavy campaign expenses in 2012 stretched state finances, and goods including toilet paper, corn flour and even newsprint have become scarce because of limited disbursement of dollars by the country's exchange control mechanism.
Consumer prices rose 4.4 percent in September, with the 12-month rate hitting 49.4 percent.
Maduro has called the shortages and rising prices part of a Washington-backed "economic war" against his socialist policies, and has promised to step up inspections of private companies to ensure they are not "sabotaging" the economy.
Opposition critics insist the problems are a sign of decay of the Chavez-era state-led economic model that included frequent nationalizations of private enterprises, strict price controls and constant confrontation with business leaders.