Venezuela to see 1 million percent inflation by year-end
And the nation's economic collapse will increasingly spill over into neighboring countries, the IMF said in its updated regional outlook for Latin America.
"We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000s," said Alejandro Werner, head of the IMF's Western Hemisphere Department.
However, that estimate "has a much higher degree of uncertainty" than most inflation forecasts, he told reporters. Still, whether the rate ends up at 1.2 million or 800,000 percent "the destruction of prices as the mechanism for allocating resources has already happened."
Venezuela's economy is expected to contract by 18 percent this year, the third consecutive year of double-digit declines and three points worse than projected in May, amid falling oil production, he said in a statement.
OPEC data show Venezuelan oil production crashed to a new 30-year low of 1.5 million barrels a day in June even though the country has the world's largest reserves of crude.
The South American nation earns 96 percent of its revenue through oil sales but under the government of populist President Nicolas Maduro a lack of foreign exchange has sparked economic paralysis that has left the country suffering serious shortages.
Venezuela's collapse is dragging down growth in Latin America and the Caribbean to 1.6 percent this year, four-tenths lower than the May forecast. ■