Venezuela: Record Earthquakes Threaten Political Instability and Raise Risks to Economic Recovery

• On Wednesday, June 24, 2026, two powerful earthquakes (7.5 and 7.2 in magnitude) struck Venezuela, primarily affecting the states of La Guaira on the northern coast and the Capital District, including Caracas. The physical devastation, poor state response, and surge in socio-economic hardship will raise socio-political instability risks in the short-term, but BMI expects the government to weather the storm.
• While the earthquake undoubtedly raises economic risks in the near-term, the broader outlook remains unchanged while the extent of the damage continues to be assessed. The United Nations Development Programme (UNDP) puts initial estimates of physical damage at US$6.7Bn, within the broader range of US$8.7-US$4.7Bn, although that number is likely to increase.
• However, given strong international aid flows and a looser sanctions profile going forward, recovery efforts could drive strong investment (construction) activity and counterbalance the weakness in private sector demand. Additionally, oil production plays an outsized role in the broader economy outlook and ramp-up in production in the first half of 2026 (H1 2026), and future prospects remain quite robust.
• As such, BMI maintained its 10.0% real Gross Domestic Product (GDP) growth forecast for 2026. While data quality is dubious, the Venezuelan government itself is reporting real GDP growth of 2.5% year on year (YoY), in the first half of 2026 (Q1 2026), driven primarily by 3.4% export growth and 4.5% private consumption growth.
• That said, Venezuela’s economic position remains precarious. The damage caused by the earthquakes will raise gross financing costs for the economy to start to recover, which adds pressure to already complicated public debt restructuring negotiations.
• Reporting suggests that ongoing audits put the total public debt load to be restructured at US$240Bn, 200% of 2025 GDP, an uptick from the US$200Bn estimate at the beginning of the year. As such, a modest widening of Venezuelan bond spreads is expected as market pricing starts to include a higher risk premium. While progress is being made, the agency is sceptical that a new payment plan will be finalised and implemented before the start of 2027.

(Source: BMI, A Fitch Solutions Company)