Dec. 29 (Bloomberg) -- Venezuela’s economy probably grew 4.9 percent in 2008, the slowest pace in five years, as crude oil prices collapsed and investment shrunk, the central bank said today in its year-end report on the economy.

Central bankers expect the price of oil, which accounted for 93 percent of exports this year, to remain volatile in the “short term,” causing investment to fall in the petroleum sector and forcing the government to dip into savings to finance spending, the bank said today an e-mailed statement.

“That’s going to be the driver in 2009,” said Boris Segura, a Latin America economist at Morgan Stanley in New York. “With collapsing oil prices, public expenditures are going to have to be contained, and that’s going to spill over to the private sector.”

The Venezuelan basket, an index of the country’s oil exports, fell below $30 this month for the first time since February 2004, the bank said. The resulting plunge in public revenue will diminish the government’s capacity to stoke growth through spending, leading to a recession in 2009, Segura said.

“It’s indispensable to establish a strict order of priorities to obtain maximum gain from investments that should be carried out,” the bank said today in its report.

Tumbling Prices

Venezuelan oil prices have tumbled since touching a record $126.46 a barrel in July.

Weaker economic growth this year was led by a slowdown in consumption and financial services.

Consumption probably increased 6.3 percent in 2008, down from 16.1 percent the previous year. Industrial production increased 1.6 percent compared with 7.2 percent in 2007. Gross capital fixed investment contracted 2.1 in 2008 after expanding 25.4 percent last year.

Activity at financial services and insurance companies declined 4.5 percent after expanding 17 percent in 2007.

“Banks are cutting back on credit,” Segura said. “They see a bleak 2009, so they want nothing to do with risk, in this case, extending credit.”

In real terms, total outstanding loans in Venezuela fell 5.7 percent in the first ten months of the year, the central bank said.

Current Account Surplus

Venezuela had a $46 billion current-account surplus this year, and a $4.16 billion balance of payments surplus, the central bank report said.

Finance Minister Ali Rodriguez has called for “austerity” in government spending and said this month the government will limit sales of dollars at the officially pegged exchange rate in a bid to save hard currency. Venezuelans can only obtain dollars at the official exchange rate from the government under exchange controls imposed in 2003.

He said the government won’t modify its 2009 budget, which is based on a forecast that oil will average $60 a barrel, until after the first quarter, when the country is expected to hold a referendum on President Hugo Chavez’s proposal to do away with presidential term limits.

Venezuela had $37.2 billion in international reserves as of Dec. 24. On top of that, the government can use $9.6 billion from the off-budget National Develeopment Fund to finance spending next year.

The central bank said today the government has “appropriate” amount of resources to withstand the plunge in oil prices.

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