(Reuters) - Venezuela’s inflation rate will reach 10 million percent next year, the International Monetary Fund (IMF) said on Tuesday in a report forecasting that one of the worst hyperinflationary crises in modern history will further deepen.
In an update to its World Economic Outlook released at the Fund’s annual meeting in Indonesia, the Washington-based lender estimated that consumer prices in Venezuela would rise 1,370,000 percent in 2018, up from a July projection of 1 million percent.
Venezuela’s economy has steadily deteriorated since the crash of oil prices in 2014 left it unable to sustain a socialist system of subsidies and price controls. In July, the IMF compared the hyperinflation in Venezuela to that of Germany in 1923 and Zimbabwe in the late 2000s.
The collapse has led to shortages of food, medicine and other basic goods, and prompted an exodus of Venezuelans that has overwhelmed neighboring countries. The IMF said on Tuesday the economy would contract 18 percent in 2018, consistent with its July forecast, and 5 percent in 2019.
President Nicolas Maduro slashed five zeros off the bolivar currency and boosted the minimum wage thirty-fold in an effort to stabilize prices in August. But inflation continued unabated in September, with prices rising 4 percent per day to reach an annualized rate of 488,865 percent, according to the opposition-run congress.
The Fund warned that its projections for Venezuela should be “interpreted with caution” because of a lack of official economic data. The central bank stopped publishing economic indicators nearly three years ago, and opposition legislators have become the only source of such information.
Maduro’s government dismisses the IMF as a pawn of Washington and says the country’s struggles are the result of an “economic war” led by the United States. Critics argue that Maduro’s expansion of the monetary supply and currency controls are the true causes of the collapse.
Reporting by Luc Cohen; Editing by Steve Orlofsky