CARACAS, Venezuela — Analysts predict Venezuela's economy is headed for a worse year than the government admits, as falling oil prices stall growth and inflation soars in the import-dependent country.

Venezuela saw growth of 4.8 percent in 2008 _ down nearly half from 8.4 percent in 2007 _ as its economy began to cool after expanding rapidly for years and as prices plummeted for the country's top export, oil.

Finance Minister Ali Rodriguez is forecasting 6 percent growth for 2009, but the U.N. Economic Commission for Latin America and the Caribbean predicts a 3 percent expansion.

OPEC-mandated cuts in oil output are contributing to the slowdown and could slow growth to as little as 1 percent, said economist Jose Guerra, a professor at Venezuela's Central University and a former Central Bank official.

Inflation has meanwhile soared to 30.9 percent, the highest in Latin America, and prices in Caracas are climbing at their quickest pace in 12 years. The Finance Ministry expects 15 percent inflation in 2009, but economists say prices will more likely climb by 28 percent to 35 percent. The Central Bank raised interest rates once last year to try to slow the surge.

Oil accounts for 94 percent of Venezuelan exports and nearly half its federal budget, and falling crude prices are pinching the public spending that fueled the country's recent boom.

President Hugo Chavez vows to continue oil-funded social programs, including subsidized food and cash benefits for single mothers. But lawmakers assumed $60-a-barrel oil prices when drafting this year's budget, and now face a likely shortfall that may force cuts or deficit spending.

Story continues below

Yet even as growth slows, inflation persists in Venezuela's heavily regulated and import-reliant economy, where price gains are slashing buying power.

Falling oil prices, which have slowed inflation in countries across Latin America, may in fact accelerate price gains in Venezuela, former Central Bank director Domingo Maza Zavala said.

Venezuela uses the dollars it earns from oil to buy foreign goods, and a sharp drop in oil earnings is reducing the amount of dollars available for imports _ potentially causing scattered shortages and pushing inflation as high as 35 percent this year, Maza Zavala said.

Chavez should battle price gains by reining in government spending on nonessentials, while taking other measures to boost production and growth, he added.

The government has already started saving dollars for imports by cutting the amount that Venezuelan travelers can spend abroad on their credit cards from $5,000 to $2,500 a year.

The government is preparing an economic package to battle the downturn, but has no plans for new taxes or a currency devaluation, Rodriguez said this week.

Some analysts expect Chavez to eventually make painful cutbacks, but doubt he will announce such measures until after a referendum on abolishing presidential term limits, expected in February. If he wins, Chavez would be able to run again in 2012 and beyond.