major macro economic indicators
|2013||2014||2015 (f)||2016 (f)||2017 (f)|
|GDP growth (%)||2,8||1,8||-0,3||-6,9||0,5|
|Inflation (yearly average) (%)||1,9||3,4||6,8||67,1||30,7|
|Budget balance (% GDP)*||-3,9||-6,8||-7,5||-10,3||-5,4|
|Current account balance (% GDP)||3,3||-3,9||-7,4||-9,4||-7,6|
|Public debt (% GDP)||21,9||30,8||40,7||40,7||46,7|
(e) Estimate (f) Forecast
- Mineral resources and agricultural potential
- Support from international donors and investors
- Dependence on oil, gold and aluminium
- Poorly diversified economy
- Size of the informal economy (30% of GDP), with casinos, gold mining and smuggling
- Problems with the management of public-sector companies
- Lack of transport infrastructure (roads, ports)
- Difficult business climate, ineffective justice system
Towards a slow recovery in activity in 2017
Suriname's economy relies heavily on exports of gold, bauxite and oil, which represent almost one third of the country's GDP and tax receipts. In 2016, economic activity contracted sharply because of weak commodity prices and whole host of fiscal and monetary measures which affected domestic demand. The central bank's decision to devalue the currency by 20% in late 2015, as well as the austerity policy conducted by the government since President Bouterse's re-election (higher taxes on fuel, gradual removal of subsidies on water and electricity) contributed to the drop in domestic demand and specifically in household consumption. In 2017, the country is expected to begin a modest recovery driven by higher public investment, supported by the award of financial aid by the IMF (stand-by arrangement) amounting to USD 478 million. The performances of the agricultural sector, which relies heavily on rice and banana cultivation, are expected to benefit from the dissipation of the effects of the El Nino weather phenomenon. The start of production at the Merian gold mine in October 2016 and the completion of extension work at the Staatsolie refinery should help boost exports. Private consumption will, however, remain weak, affected by the fall in household purchasing power because of inflation, which, although lower, remains high. This climbed sharply in 2016 in response to the devaluation of the local currency, which affected most imported consumer goods.
Continuation of fiscal consolidation policy
In 2016, the fiscal deficit deepened because of the fall in income from the mining sector (about 30% of tax receipts) and the expansionary policy conducted by the government in 2015 (electoral period) comprising, in particular, an increase in civil service wages. Faced with slippage in the public accounts, the authorities decided to proceed with budget restructuring involving, in particular, a freeze on civil service wages, a cut in subsidies on water and electricity prices and in public investment spending depending on the external financing obtained. Thanks to the implementation of its reforms, Suriname has been able to benefit from IMF financial aid (USD 478 million). The country also issued 10-year bonds (USD 550 million) at 9.25% in late 2016. The use of borrowing is expected to contribute to an increase in the public debt. Monetary policy is expected to remain cautious, but the central bank's room for manoeuvre will remain limited because of weak foreign exchange reserves. In May 2016, the central bank decided to abandon the currency's pegged float against the dollar, after a 20% devaluation of the currency in late 2015.
External trade hit by weak commodity prices
The current account balance deteriorated sharply in 2016 in connection with the persistent weakness of commodity prices (gold, bauxite, in particular) and the closing of the aluminium refinery belonging to the Alcoa group. In 2017, the current account deficit is expected to narrow but will remain large. It will be maintained by the expected increase in the volume of gold exports thanks to full production at the Merian mine and of oil derivatives, which will benefit from the completion of extension work at the state oil company, Staatsolie. Moreover, exports of mining and non-mining products are also expected to become more competitive due to the depreciation of the local currency against the dollar. Imports of consumer goods, now more expensive, are however expected to cool, although the resumption of investment will require new purchases of imported capital goods.
A government which is losing popularity
President Désiré Bouterse, leader of the National Democratic Party (NDP), is expected to continue his programme of reforms in order to maintain financial support from the international institutions. The austerity measures (including higher electricity and water tariffs) and the effects of the currency's depreciation which has hit most imported consumer goods, are, however, proving very unpopular and impact on the government's image with the population. Limited access to credit, under-developed infrastructure and the lack of skilled labour continue, moreover, to hamper the business climate. Internationally, President Bouterse's relations with the Netherlands and the United States will remain tense. The former dictator is alleged to secretly support drug trafficking and money laundering.
Last update : January 2017