Venezuela in recession with 4.5 pct dip in 3rd qtr

CARACAS, Venezuela - Venezuela's economy shrank 4.5 percent in the third quarter from a year earlier amid continued depressed world oil prices, dragging the South American country into recession for the first time since 2003.

It was the second consecutive quarterly decline, with the economy dipping 2.4 percent in the April-June period after a small 0.3 percent rise in the first three months. The economy grew 4.8 percent in 2008, down from an 8.4 percent increase in 2007.

Economic activity related to Venezuela's all-important oil sector decreased 9.5 percent from January through September, compared to 6 percent growth during the same period last year. Overall, the economy contracted 2.2 percent during the first nine months of the year.

In a statement Tuesday, the Central Bank attributed the economic slippage to "the effects of the global financial crisis and the weakening of petroleum prices." World crude prices have dropped about 50 percent from the peak reached in July 2008.

"Venezuela is receiving the effects of that crisis," Finance Minister Ali Rodriguez said in an interview on state television. He said the government estimates growth could return to a modest 0.5 percent in 2010.

Rodriguez and the Central Bank both said the economic downturn was affected by Venezuela's agreement last January to cut oil output 364,000 barrels a day under quotas established by the Organization of Petroleum Exporting Countries in an effort to boost prices. Oil accounts for roughly 93 percent of Venezuela's exports.

The fall in oil income also brought a sharp decline in the dollars that Venezuela made available to pay for its imports, and that affected the manufacturing sector as well, Rodriguez said.

Asdrubal Oliveros, an analyst at the Caracas-based Ecoanalitica think tank, was surprised by the extent of the economic downturn.

He said the Central Bank's statistics were very worrying, especially for the oil sector. He noted the state-run oil company, Petroleos de Venezuela SA, has run up $10 billion in debt this year while struggling to increase production capacity and revenue.

Oliveros said the economy also has been hurt by what he described as anti-private-sector government policies under President Hugo Chavez; disorderly management of revenue and spending; and currency exchange controls that restrict the amount of U.S. dollars businesses can obtain at the official rate to import goods and parts.

During the third quarter, private economic activity unrelated to the oil industry decreased 5.8 percent, with manufacturing dipping 9.2 percent, retailing 11.5 percent and mining 18.3 percent, the Central Bank said. The construction sector grew 4.3 percent and the communications sector increased 11.4 percent.

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