Venezuela Economy

Venezuela Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

After an estimated decline in real GDP of 31% in 2020 (and a cumulative reduction of almost 77% since 2013), a marginally positive growth of 0.7% is expected in 2021 after a long period. GDP is strongly correlated with oil, its production and world prices. After production fell to an average of 500,000 b/d in 2020 — the lowest level in several decades — crude production could stabilize in 2021 as global demand recovers. However, the national PDVSA’s ability to significantly increase oil production is severely limited due to the country’s long-neglected oil platform restoration.

According to, the non-oil economy, albeit minimal, will make moderate gains in 2022-25, provided continued dollarization can contribute unhindered to relative macroeconomic stability. The immediate challenge should be to manage the public health crisis caused by long-term underfunding exacerbated by the outbreak of the pandemic. In the fight against the pandemic, Venezuela implemented various measures, which in the last wave have already completely failed and only intensified the economic decline of the country, and above all of the health system itself. Doctors and medical personnel have been leaving the healthcare industry for a long time, but the coronavirus has also taken its toll on the lives of many healthcare professionals. The regime shows little inclination to adopt fiscal and macroeconomic reforms that would address the root causes of the hyperinflation that has plagued the country for several years. support mode, although little anchored formally, the spontaneous dollarization of the economy, which has been ongoing for several years, has gained momentum, which could help alleviate inflationary pressures. However, some analysts are already reporting that inflation is occurring even within the dollar semi-legal economy. The slight decrease in inflation in the last two years is attributed precisely to the permission to import goods for some members of the regime and the army, who resell these goods only for dollars and at prices that are often several times higher.

Figures from the International Monetary Fund indicate that Venezuela reached an unemployment rate of up to 58.3% in 2020 and has so far maintained it at the same high level in 2021.

Pointer 2018 2019 2020 2021 2022
GDP growth (%) -19.6 -36.8 -30.3 -3.7 7.0
GDP/population (USD/PPP) 8,670.0 5,930.0 4,180.0 4,190.0 4,600.0
Inflation (%) 1,005,130.7 17,365.2 3,634.1 1,098.7 360.5
Unemployment (%) 6.9 24.0 50.3 45.5 43.1
Export of goods (billion USD) 33.7 17.0 4.8 9.4 11.0
Import of goods (billion USD) 12.8 6.8 7.9 8.6 9.7
Trade Balance (Billion USD) 20.9 10.2 -1.2 0.9 0.5
Industrial production (% change) -30.7 -28.0 -20.0 -4.0 12.0
Population (millions) 31.6 29.8 30.1 29.3 29.1
Competitiveness 127/140 133/141 ON ON ON
OECD export risk 7/7 7/7 7/7 7/7 ON

Source: EIU, OECD, WEF

Public finance and state budget

Public finance
State budget balance (% of GDP) -18.8
Public debt (% of GDP) 313.7
Current account balance (billion USD) 0.8
AFTER 15 – 50%
F.O 6 – 34%
VAT base rate 16%

However, the high level of inefficient current spending combined with extremely weak revenue is expected to maintain a large budget deficit and an astronomical public debt-to-GDP ratio for years to come. The regime will continue to depend on monetization to finance its deficits. Banco Central de Venezuela (BCV, the central bank) continues to print money to finance government budget deficits. Even though the government has reached an agreement with some of its creditors (including China) to restructure its debt obligations, the public debt burden is still expected to remain huge in 2021-25, especially as significant off-balance sheet debt financing – especially debt and development funds issued PDVSA – understates the true size of total public liabilities. Assuming, that oil prices remain favorable and eventually US sanctions begin to be eased (or refiners increasingly adapt to export markets beyond the reach of sanctions), economic growth can be expected in 2022. This is further conditional on the improvement of the overall situation in the country and the overcoming of PDVSA’s serious operational problems (eg difficulties in obtaining equipment for repairs and finding qualified personnel).

Banking system

The Venezuelan banking system is characterized by the fact that it is dominated by national public banking, which covered 58.03% of total market deposits by June 2020, while private banking occupied 41.67% and the rest in the hands of microfinance banking, development banking and municipal credit institutions ( 0.30%). As of June 2020, 29 financial institutions were registered; 24 of them are universal banks, 1 commercial only bank, 3 billion microfinance banks and 1 municipal credit institute. The sector employed 45,638 people in 3,022 offices and/or agencies. The leading bank by total market share to date is Banco Central de Venezuela with 49.21%, followed by Banesco with 8.47%, BBVA Provincial with 8.37%, Banco Mercantil with 6.65% and BOD with 5.13%.

Tax system

The tax system in Venezuela remains very complex and requires extensive knowledge, especially in terms of legal certainty in the interpretation of tax provisions and their difficulty, given the variety of taxes that make up the system. Resident companies and businesses are taxed on the full breadth of their income, including foreign income, while non-residents are taxed up to the amount of their income originating in Venezuela. Foreign companies are taxed on the basis of the income of their local branch, wherever it originates. The progressive tax rates are 15%, 22% and 34%. Financial institutions are taxed at 40%. Oil companies pay 50% of net profit.

Corporate income tax: The maximum amount of corporate income tax is set at 50% for companies with a net profit of over 3,000 tax units, 22% for companies with a profit of 2,000-3,000 tax units and 15% for companies with a profit of up to 2,000 tax units (the tax unit – Unidad Tributaria – is established by law). In addition to the general tax, the company is obliged to pay the so-called impuesto municipal to the city in which it is located.

Personal income tax: The maximum amount of this tax is 34% (for an annual income of over 6,000 tax units), the minimum is 6% (for an income of 1,000-1,500 tax units). Permanent residents (residents – stay more than 180 days) are subject to the same regime as local citizens, non-residents (up to 180 days) pay a general tax of 34%. Some income is exempt from this tax, e.g. interest on savings, insurance premiums, pensions.

Capital Gains Tax: Under the 1994 tax reform, all capital market transactions are subject to a tax of 1% of each trade. Transactions made outside the capital market are subject to different taxation, a private person pays 3%, a resident company 5% and a non-resident foreign firm 50%.

Value Added Ta x: Currently 16%.

Agreements to avoid double taxation: Within the EU countries, Venezuela has signed these agreements with Italy, France, the Netherlands, Germany, Belgium, Great Britain, Portugal, Sweden and the Czech Republic.

Venezuela Economy