THE ECONOMIC CRISIS IN VENEZUELA Fabi Mattias

THE ECONOMIC CRISIS IN VENEZUELA

Hyperinflation is the out of control general price increase in an economy. Venezuela has the highest inflation rate in the world being at 10,000% in 2019, to contrast this the inflation rate in the UK in 2019 was 1.79%. The main cause of this was Venezuela's heavy reliance on oil making up 90% of their total income from exports, and the drop of international oil prices In the 1980s. This fall in demand for oil led to the value of the bolivar (Venzuelan currency) decreasing, meaning the price of imports increased which over time had put them in debt of an estimated $150 billion (which is more than double the estimated size of its economy), and therefore leading to a further increase in inflation.

As a result, the venezuelan government was unable to pay for most of their imports causing industries in the economy to collapse- in the healthcare industry alone, there was an 85% shortage of medicine, causing Venezuelans and health care workers having to buy medicine and other goods on the black market. In 2013 the president made the decision to print more money to keep the economy moving to overcome this issue caused by a short-term price shock, however this only caused the economy to shrink by an extra 30%.

As their debt continues to increase, crime rates, wages and prices of imported products also continue to increase due to the government underfunding police and other sectors in the economy. It has been said that the average family requires more than 100 times the official minimum wage to meet its basic needs- in 2019 the average worker's income in Venezuela was just $0.92 per day putting 96% of the population in poverty,People on lower salaries who were struggling to keep up with the increase of prices have started to exchange their bolivars for a more stable currency - in this case the US dollar. People have even started using crypto currencies in order to buy and sell goods for lower prices.

As a result of the hyperinflation and economic crisis, between 2015 and 2021, 16% of people within the population have fled the country, whilst others look for ways to tackle high priced goods and lack of support given from the government.