In Venezuela, inflation quadruples to 18,000 percent in two months, with no end in sight

Accompanied by his son Nicolás, Venezuela's President Nicolás Maduro raises a fist as he arrives at a military parade in Caracas on Friday, April 13, 2018.
Accompanied by his son Nicolás, Venezuela's President Nicolás Maduro raises a fist as he arrives at a military parade in Caracas on Friday, April 13, 2018. AP

Venezuela's inflation rate, already by far the world's highest, spiked from 4,966 percent to nearly 18,000 percent in just March and April — a trend that, if it continues, could push the country's annual rate to more than 100,000 percent by year's end, economists say.

The 17,968 percent rate registered at the end of April already surpassed the 13,864 percent rate predicted by the International Monetary Fund for all of 2018.

“What we're seeing at this point is a giant jump in inflation,” Steve Hanke, a professor at Johns Hopkins University and one of the world's top experts on inflation, told el Nuevo Herald.

“And it could go much higher than what we're seeing today,” added Hanke, who calculated the 17,968 percent figure. He keeps a daily record of inflation in Venezuela.

Compared to world records on hyperinflation, what is happening in Venezuela now is modest. Hungary suffered through 207.19 percent inflation per day in 1946. Venezuela's inflation in March and April was about 80 percentage points per month.

But the high inflation has been devastating for Venezuelans, whose salaries often are not enough to pay for one meal a day.

One kilogram (2.2 lbs) of meat today costs about 2 million bolivares, or about $2.35. But the monthly salary of a surgeon stood at less than 6 million bolivares in mid-April.

Worried by the growing discontent among Venezuelans, the Nicolas Maduro government nearly doubled the minimum salary on Monday, raising it to 2.5 million bolivares per month.

That hike is expected to quickly double all salaries in Venezuela, and pour more gasoline on the flames of hyperinflation, according to experts.

The giant surplus of bolivares circulating in Venezuela, the result of printing more and more currency to cover a monumental government budget deficit, is one of the key drivers of the country's inflation, said Alexander Guerrero, a Venezuelan economist who lives in the United States.

The salary increase ordered by Maduro will simply put more bolivares in the hands of consumers, who will rush to buy the few products available in stores and thereby drive prices even higher.

The government also has increased spending on populist programs as it tries to encourage Venezuelans to vote in controversial presidential elections scheduled for May 20.

“These elements are pushing the country into a hyperinflationary spiral that is gaining strength,” said Caracas economist Orlando Ochoa.

“Right now we're seeing an average rate of inflation that ranges from 60 to 90 percent per month,” Ochoa added.

If inflation remains steady, Venezuela could end 2018 with an annual rate of 100,000 percent, Ochoa said, using the estimate of 80 percent a day compounded over the year.

Hanke said hyperinflation is so unstable that it's impossible to predict a rate for 12 months.

The IMF prediction was nothing more than raising “a wet finger to the wind,” he added.

But for now it's clear the Maduro regime is not taking any steps to slow the rise of consumer prices.

What's more, his policies over the past five years have only worsened the economy and sparked complaints that Maduro is following in the footsteps of Zimbabwe. The African country suffered the second highest rate of inflation in history — 98.01 percent per day, meaning that prices doubled every 24.7 hours.

Follow Antonio María Delgado on Twitter:@DelgadoAntonioM