UPDATE 3-Venezuela economy grew 5.4 pct in second quarter

Fri Aug 17, 2012 11:29pm IST

* Country marks seventh consecutive quarter of growth

* Construction sector led growth during second quarter

By Eyanir Chinea

CARACAS, Aug 17 (Reuters) - Venezuela's economy grew 5.4 percent in the second quarter, more than double its rate during the same period last year, giving President Hugo Chavez a boost as he campaigns for re-election in October.

His socialist administration has been spending heavily on infrastructure and development programs as Chavez seeks to shore up his base among the South American country's poor majority, as well as try to win over undecided voters.

"The economy is beginning an important reactivation and it's reflected in this figure. All economic activities grew during the second quarter, except mining," Central Bank boss Nelson Merentes told a news conference on Friday.

The authorities also revised up the growth figure for the first quarter of 2012, to 5.8 percent from 5.6 percent. Venezuela, the continent's top oil exporter, is also now one of its fastest growing economies, with seven consecutive quarters of growth.

The oil sector grew 1.0 percent in the second quarter, and the non-oil sector grew 5.7 percent. During the second quarter of last year, the economy expanded by 2.6 percent.

"We are growing at a greater speed than what was estimated in the budget," Finance Minister Jorge Giordani said. The 2012 budget forecast overall annual growth of around 5.0 percent.

The construction sector posted the strongest growth during the second quarter, at 17.6 percent. The government has embarked on a huge house-building program ahead of the election.

Local economists have warned that strong domestic demand combined with growing state spending risks fueling stubbornly high inflation, which hit 27.6 percent last year. The government says annual inflation to July was 19.4 percent.

Critics say Venezuela's economy, Latin America's fifth largest, should be doing better given high oil revenues and that it risks a post-election "hangover" of rising debt, untamed inflation and a probable currency devaluation.

Chavez, who is enjoying a double-digit lead in most polls ahead of the election, hailed the latest figures on Twitter.

"Good morning, patriotic world!" the president said on his @chavezcandanga account. "Look how inflation keeps falling and now GDP is growing again too ... Bravo!"

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