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Macroeconomic factors drive Crisis (IPC Phase 3) outcomes for poorer households with income in local currency

  • Key Message Update
  • Venezuela
  • May 2023
Macroeconomic factors drive Crisis (IPC Phase 3) outcomes for poorer households with income in local currency

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  • Key Messages
  • Key Messages
    • Consistent price increases in the local currency, the digital bolivar (VED), are significantly reducing the purchasing power of poor households who receive their income in the local currency. The situation is especially difficult for those who do not receive remittances and have limited access to the social protection system, as they will have to resort to unsustainable coping strategies or will experience food consumption gaps – resulting in Crisis (IPC Phase 3) outcomes for these households through September. Although these households are spread throughout the country, there are concentrated pockets, especially in the urban and peri-urban areas around Caracas and in the Zulia region, without the concentration being high enough to classify this phase at the area-level. The remaining poor households depend on the informal economy for their income – but do receive income in dollars and typically have better access to social programs and/or international remittances – allowing them to cover a basic diet. Given this, these households will be classified as Stressed (IPC Phase 2) through September, driving area-level classification of Stressed (IPC Phase 2) as well.

    • At the beginning of May, the Venezuelan government reported a discretionary increase in the amount of the food bonus (Bono Alimentario) and the economic bonus (Bono Contra la Guerra Económica, an additional income included in the package given to all Venezuelan workers) due to the increase in prices. If implemented, it will mean a significant increase in income for public sector workers and retirees. In the case of governmental food assistance or CLAP, this month there has been a slight decrease in its frequency in areas outside Caracas, after the stability shown in April, as there is a seasonal decrease in food inventories, which will continue into June. This change means a reduction in the availability of food for recipient households.

    • In April, headline and food inflation rates in VED decelerated with respect to March and month-on-month increases remained below five percent thanks to the exchange rate stability due to a greater supply of dollars from oil production and Chevron's participation in the exchange market. The year-on-year variation of general inflation increased to 436 percent in April, but, according to Síntesis Financiera, the government's decision to discard the adjustment to the minimum wage will reduce the growth of public spending and will produce a slowdown in inflation rate increases. Síntesis Financiera’s year-on-year headline inflation projection for 2023 has been adjusted to 188 percent, representing a decrease from 2022. The exchange rate may change in the following months, but with less volatility, favoring stable prices in dollars and a slower pace of depreciation of the local currency and, therefore, a slight improvement in access to food for the majority of poor households.

    Recommended Citation: FEWS NET. Venezuela Key Message Update, May 2023: Macroeconomic factors drive Crisis (IPC Phase 3) outcomes for poorer households with income in local currency, 2023.

    This Key Message Update provides a high-level analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography. Learn more here.

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