Venezuela (Bolivarian Republic of)

The decline in growth amid falling oil prices and rising inflation

Venezuela's economic growth in 2025 occurs in a context of fragile and essentially defensive macroeconomic stabilization, sustained almost exclusively by external and temporary factors. The main driver of this improvement was the increase in oil exports, made possible by the selective easing of US sanctions and, above all, by the maintenance of Chevron's license, which allowed the regime to preserve access to hard currency without immediately resorting to monetizing the deficit. This additional flow of dollars contributed to a partial recovery of international reserves, which reached their highest level in a decade, and helped to contain exchange rate volatility, resulting in only a moderate depreciation of the bolivar throughout the year and avoiding, for now, a return to hyperinflation. The performance in 2025 does not constitute a structural recovery of the economy. Growth remains disconnected from productivity gains, private investment, or institutional strengthening, occurring amid chronic underinvestment, deteriorating public services, loss-making state-owned enterprises, and an extremely narrow productive base. The economy remains overly dependent on oil as a source of foreign exchange, vulnerable to external shocks and US policy stance, while the domestic environment continues to be marked by high informality, low tax collection, and severe constraints on sustained growth capacity.

For 2026, economic growth expectations have become substantially more uncertain due to the political conflict that occurred in January, which unexpectedly altered the previously observed balance between limited economic stabilization and regime continuity. This new context increases the degree of unpredictability regarding the conduct of economic policy, the functioning of institutions, and the country's ability to maintain stable flows of hard currency. The Venezuelan economy remains structurally dependent on the oil sector and the stance of the United States, which makes growth particularly sensitive to changes in the political environment. The current uncertainty tends to negatively affect production, export, and investment decisions, including in the oil and gas sector, weakening the main channel of support for activity observed in 2025. In this scenario, growth in 2026 should not be understood as an automatic extension of the dynamics of 2025. Although an immediate economic collapse is not the baseline scenario, increased political uncertainty reduces the predictability of foreign revenues, limits the government's ability to plan spending, and increases the likelihood of additional fiscal and monetary pressures. Consequently, expectations for 2026 point to expansion that is highly dependent on the definition of the new political arrangement and the response of the international community, with risks skewed to the downside and a lack of internal fundamentals capable of sustaining a more lasting growth cycle.

With political uncertainty, fiscal weaknesses persist

In 2025, Venezuela's economic situation was characterized by a combination of temporary external relief and persistent structural fragility. The current account remained in surplus, but this result reflected mainly the compression of imports imposed by sanctions, limited access to external financing, and low domestic income, rather than a healthy expansion of productive capacity. Nevertheless, the selective easing of sanctions and the maintenance of Chevron's license boosted oil exports and increased the inflow of dollars, allowing for some recovery of international reserves and sustaining a minimum level of imports, including through parallel channels. In the fiscal arena, the partial recovery of oil revenues reduced the immediate need to monetize the deficit, but it was not enough to alter the structural dynamics of public accounts: the deficit remained high, reflecting a bloated state, chronically deficit-ridden state-owned enterprises, a tax base weakened by informality, and little room for fiscal consolidation without compromising patronage networks. In this context, public savings remained negative and private savings remained depressed, limited by low real income, institutional uncertainty, and the absence of functional financial intermediation channels.

In 2026, the outlook for the current account, fiscal balance, and savings formation became substantially more uncertain, as the political and institutional environment began to introduce greater volatility into the main macroeconomic channels. The sustainability of the current account surplus has become less predictable, as it depends almost entirely on the continuity of oil export flows and the degree of access to foreign markets, in a context of greater risk of disruptions and stricter enforcement. Any weakening of dollar inflows would tend to translate not into financeable external deficits, but into further compression of imports, deepening restrictions on economic activity and consumption. On the fiscal front, uncertainty directly affects the predictability of revenues, while spending rigidities—associated with maintaining the state apparatus, loss-making state-owned enterprises, and possible additional pressures on security spending—further reduce the capacity for adjustment. With virtually no external access and a very narrow domestic investor base, deficit financing becomes more fragile, raising the risk of greater recourse to monetary financing. This situation tends to keep public and private savings at very low levels, weakening economic buffers and leaving the economy more exposed to shocks throughout 2026.

Maduro consolidates power amid contested election and rising geopolitical tensions

Since Nicolás Maduro took office for his third term after the 2024 presidential elections, which were widely contested due to suspicions of fraud, Venezuela's domestic political scene has remained marked by a serious legitimacy deficit and institutional deterioration throughout 2025. These tensions deepened in the legislative and regional elections held in May 2025, in which the United Socialist Party of Venezuela (PSUV) won a landslide victory—winning in 23 of the 24 states and achieving more than 80% of the votes on the national lists — in a process boycotted by most of the opposition, which denounced the absence of electoral guarantees after the previous year's presidential race. The election was also marked by arrests of opponents, restrictions on political mobilization, and a strong security presence, consolidating Maduro's control over subnational powers and the legislature, but reinforcing the perception of uncompetitive elections with low public credibility. Despite internal and external criticism, strategic and commercial partners such as China and Russia formally recognized the legitimacy of Maduro's victory, although they adopted a cautious and pragmatic stance, avoiding more active political involvement or significant material support, in part so as not to deepen tensions with the United States.

The political crisis, which had reached a stage of stagnation in 2025, evolved into a profound collapse of institutional order. Throughout the year, relations between Venezuela and the United States deteriorated progressively, moving from economic pressure to direct military confrontation, reflecting an unprecedented escalation in bilateral tensions. Under the pretext of combating drug trafficking, the US administration intensified naval operations and interceptions of vessels linked to the transport of oil and drugs associated with the so-called Venezuelan “shadow fleet,” including blockades and seizures of oil tankers in the Caribbean and the Atlantic. Washington justified the campaign as a strategy to interdict illicit activities and put pressure on Nicolás Maduro's regime. This dynamic culminated in a surprise military operation in early January 2026, during which US special forces captured Maduro in Caracas and transferred him to New York, where he faces federal charges of drug trafficking, narco-terrorism, and other crimes, pleading not guilty before the court. With Maduro's unexpected departure, Vice President Delcy Rodríguez was declared interim president by the Supreme Court, effectively ending the third term that began in January 2025.

Last updated: January 2026