By Daniel Cancel and Matthew Walter

May 27 (Bloomberg) -- Venezuela's economy grew at its slowest pace in more than four years in the first quarter as government nationalizations caused investment to decline.

Gross domestic product expanded 4.8 percent from a year earlier, the central bank said today in a statement, the slowest pace since the end of a recession caused by an oil- industry strike in 2003. Growth trailed the 6.7 percent median forecast from 11 analysts surveyed by Bloomberg.

Venezuela's economic expansion slowed even as President Hugo Chavez used record oil revenue in the Western Hemisphere's biggest crude exporter to boost state control of the economy. Capital investment decreased 1.8 percent in the first quarter. ``It's paradoxical that you have investment contracting with an environment with such high oil prices,'' said Alberto Bernal, managing director of emerging market research at Bear Stearns Cos. in New York. ``That tells you there are some significant question marks from private individuals about the future of the country.''

The economy has grown 12.1 percent on average during the past four years as the government increased social spending. Production of food and other goods hasn't kept up with demand, helping fuel Latin America's highest inflation rate.

Consumer prices in Caracas rose 29.3 percent in April from a year earlier. Growth also slowed after the central bank raised consumer interest rates and the government increased sales of dollar-denominated bonds to local investors to drain liquidity.

Sustaining Growth

``Domestically, there aren't enough goods, production, labor and capital to keep this growth rate,'' said Alejandro Puente, an economist at Banco Provincial SA in Caracas. ``They've implemented policies to reduce growth.''

Last month the government sold $4 billion in bonds to drain liquidity in a bid to cool economic growth and curb inflation.

In 2007, Chavez assumed state control of four heavy-crude joint ventures and nationalized the biggest telephone and electricity companies. This year he's announced more takeovers in the steel, cement and coal industries.

Non-oil sector GDP expanded 5 percent in the first quarter, its slowest rate since 2003. Even as overall output slowed, gross domestic product in the oil sector rebounded, expanding 3.3 percent.

Gross domestic product in the oil sector had been declining for the past three years. Crude oil production in Venezuela fell to 2.32 million barrels a day in April from 2.7 million barrels in October, according to Bloomberg estimates.

Oil Prices, Output

A 70.2 percent increase in oil prices in the first quarter compensated for a 2.1 percent decline in the volume of crude exports, the central bank said.

Venezuela's trade balance in the first quarter more than doubled to $11.1 billion, the central bank said.

The slowdown in growth was spread over almost all parts of the private sector. Manufacturing expanded 1.4 percent in the period, down from 6.8 percent in the same period a year earlier. The Financial sector contracted 6.4 percent, after expanding 28.8 percent in the first quarter last year.

``Growth at the rate Venezuela has been experiencing is unsustainable in the long term, unless they have high investment rates like in China,'' Puente said.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Matthew Walter in Caracas at mwalter4@bloomberg.net.