Venezuela's government expects the economy to contract 10.7 per cent this year, a worse outlook than previously forecast, according to an interview with Finance Minister Mr Tobias Nobrega published today.
Mr Nobrega, who earlier estimated the economy would slide about 8.9 per cent this year, told El Nacionalnewspaper he believed the worst was over for the battered economy of the world's fifth largest oil exporter.
The finance minister was also quoted as saying the government could consider a devaluation of the local bolivar currency in the third quarter as the current fixed exchange rate was undercut by black market rates against the dollar.
Venezuela's economy contracted 8.9 per cent last year and nearly 30 per cent in the first quarter of this year after a two-month opposition strike severely disrupted vital oil output and shipments.
Most analysts paint a more pessimistic picture as political conflict over the government of leftist President Hugo Chavez undermines the economy. The International Monetary Fund has said it expects Venezuela to post a 17 per cent economic contraction for the year.
In February, the government introduced strict currency controls to halt capital flight and shore up the bolivar. The local currency has been set at a fixed rate of 1,600 bolivars to the greenback, but on the black market the US currency trades at about 2,600 bolivars.
The government has said the currency curbs and price controls on basic goods will not be lifted in the short term. Private business leaders say the controls are sinking the economy deeper into recession by limiting access to dollars needed for imports and external debt payments.