Hugo Chavez's government has intervened in several economic sectors
The Venezuelan economy shrank by 5.8% in the last three months of 2009 compared with year earlier, the country's central bank has announced.
For the whole of 2009, the Latin American economy shrank 3.3%.
The bank blamed the contraction on the global economic crisis and "the weakness of the price of oil and output reductions" set by producer group Opec.
Venezuela relies heavily on revenues from its oil reserves for its economic growth.
The country's economy shrank faster in the final three months of 2009 than in the previous quarter.
"Venezuela did better than most countries at the beginning of the global recession, but now it's in greater trouble," said Juan Pablo Fuentes at Moody's Economy.com.
Economists expect the economy to record very low growth in 2010.
Earlier this month, Venezuelan President Hugo Chavez signed a decree declaring an "electricity emergency" to help his government tackle power shortages.
He said the country was facing the worst drought in 100 years. Rolling blackouts are already in force in parts of Venezuela.