Boston, MA -- (SBWIRE) -- 01/01/2014 -- As an important oil-exporting economy Venezuela retains substantial resilience despite recent economic mismanagement and heightened political risk. BMI's view is therefore that the economy will continue to see positive but disappointingly low GDP numbers. After 5.6% GDP growth in 2012, we estimate the pace fell to 2.0% in 2013, and are forecasting that it will reduce further to 1.5% in 2014. On the political front President Nicolas Maduro, elected in early 2013, will continue to follow the left-wing and nationalist policies of his predecessor, the late Hugo Chavez. But Maduro lacks Chavez' leadership skills and political instincts, and so will be more exposed to in-fighting within the ruling Partido Socialista Unido de Venezuela (PSUV); he may not be able to command as much army support as his predecessor.

Growth drivers will be oil revenue and the trade surplus (both somewhat reduced), government social spending and private consumption. Private consumption represents around 60% of Venezuelan GDP. Its rate of growth will however be undermined by high inflation, which has touched 45%, a 16-year high.

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Chaotic price freezes and foreign exchange controls have meanwhile led to widespread shortages and misallocation of resources. We believe another big devaluation of the local currency will be unavoidable in 2014. Investment, meanwhile, which has been significant in recent years, will fall because the government will prioritise current spending for political reasons, and because the private sector will be put off by political risk and high levels of uncertainty. The contribution from net exports to growth has also dwindled.

Oil production has been falling while imports have surged by an annual average of 15.8% over the last decade as the country becomes increasingly reliant on basic goods produced abroad. The weak bolivar and currency controls are now slowing import growth.

Our view on the country's freight transport sector continues to be bearish, due to concerns about lack of sustainable import demand, and slowing oil exports. In particular, the chronic mismanagement of the country's port facilities since they were nationalised in 2009 has damaged their international reputation and their profit-making abilities. We do not expect any significant recouping of lost throughput levels over the medium term. Over a longer period, investments from China could see the facilities begin to regain some lost ground.

Regarding transport modes, air freight will lead the way, followed by shipping (Venezuela lacks reliable data on its small railfreight and large road haulage volumes).

Headline Industry Data

- Air freight volume carried in 2014 will expand by 6.3% to 6.46mn tonnes-km, with average annual growth of 4.8% to 2018.

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