Venezuela's Economy Expected to Worsen in 2016 - Here's Why

Venezuela's economic downturn is expected to continue this year. After the country's president Nicolas Maduro declared a state of "economic emergency" for 60 days last month, a new study revealed that the situation is not likely to get better soon.

The South American nation currently ranks as the world's most miserable economy. Its misery index is four times worse than Argentina. Venezuela's declining economy is also expected to further worsen in 2016. As the most miserable country out of the 63 nations surveyed, the idea that it can possibly worsen even more is dismaying. 

In a bid to make people within and outside the failing economy understand what is happening, experts have provided some reasons why Venezuela's economy has plunged into a deep crisis.

Oil Market Crash

Since 95% of the economy depends on its oil income, the oil crash has hurt it significantly. According to Barclays economist Alejandor Arreaza, Venezuela is the "biggest loser" among Latin American countries. Because of the low oil prices, the country's exports will barely reach $27 billion, he said. Exports reached $75 billion only two years ago. This has great implications for both the people and the economy.

Back in 2013, oil was priced at $100 per barrel. This year, the prices have reached an alarming low of $28.36. This is the lowest it has been for the past 12 years. Regardless of what the government plans to do, the economy will be hard pressed to recover unless the oil prices hike up.

Currency Devaluation

The country's currency, crudely put, is currently worth second to nothing. The bolivar has been devalued at a rapid pace. Only a year ago, a dollar can buy 175 bolivars. This year, Venezuelans will need 865 bolivars to get a dollar. One bolivar in effect, is worth $0.0011, which is less than a penny.

Politics and Power Struggle

Maduro's reign is already rubbing Venezuelans the wrong way. They have had enough of the restrictive regime. In January, the opposition party Democratic Unity managed to secure 109 seats in Congress. Maduro's socialist party only managed to win 55 seats, a sign that Venezuelans already have had enough. With Democratic Unity holding the majority of the seats, it now has the power to pass reforms that even Maduro cannot overturn. The party can also remove Maduro's cabinet members.

Maduro however, may have foreseen this happening and put new supreme court justices in place right before the new Congress took office. With the supreme court justices firmly supporting Maduro, they can simply overturn the Democratic Unity's legislation and create a government gridlock as a result.

With all of this happening and no signs of change in the near future, Venezuela's economy will continue to decline. The country is also facing difficulties covering its debt payments, not to mention securing basic food items for ordinary Venezuelans.

There is a high chance that the country's inflation rate will reach 152% this year, a giant leap from the 98.3% last year. Its unemployment rate will also reach 7.7% from 6.8%. Both are bound to further stimulate the decline of the economy.

Here is a video of President Nicolas Maduro addressing the oil market crash.