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Venezuela creeps out of hyperinflation, but no one feels it

CARACAS (AFP) – Economists said Venezuela has come out of a four-year cycle of hyperinflation, but citizens like pensioner Humberto Reco are still waiting to see the evidence.

The crisis-wracked South American country ended 2021 with inflation of 686 per cent, according to the central bank, meaning the end of a period of hyperinflation that began in 2017.

Walking through the popular Chacao market in Caracas, Reco does not see any positive effect on prices.

“They say hyperinflation is over, but where I am, it’s still there,” said Reco, 75. “Honestly, I don’t see any improvement.”

Venezuela’s inflation remains the highest in the world, and prices are continuing to rise uncontrollably.

A boy pulls a suitcase in Barinas state in Venezuela. PHOTO: AP

According to a widely accepted definition of hyperinflation from 1956 by late United States (US) economics professor Philip Cagan, it begins when monthly inflation rises by more than 50 per cent.

To come out of it, a country needs to keep monthly inflation increases under 50 per cent for an entire year, Cagan proposed.

“According to Cagan’s figures, we’re already getting out of hyperinflation,” professor of economics at the Metropolitan University in Caracas Hermes Perez told AFP.

However, US economists Carmen Reinhart and Kenneth Rogoff proposed a different hyperinflation parameter of 500 per cent a year.

According to them, “there’s a little more to go,” said Perez.

What is clear, though, is that Venezuela’s official inflation figures are heading in the right direction.

The country ended 2017 with 862 per cent inflation before it spiralled out of control in 2018, reaching a mind-blowing 130,000 per cent.

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