major macro economic indicators
|GDP growth (%)||2,8||1,8||0,1||-2,0|
|Inflation (yearly average) (%)||1,9||3,3||3,5||4,7|
|Budget balance (% GDP)*||-6,8||-7,5||-10,3||-5,4|
|Current account balance (% GDP)||-3,9||-7,4||-9,4||-7,6|
|Public debt (% GDP)||30,8||29,3||40,7||46,7|
(e) Estimate (f) Forecast
- Mineral resources and agricultural potential
- Support from international donors and international investors
- Surinamese dollar tied to the US dollar
- Dependence on oil, gold and aluminium
- Poorly diversified economy
- Scale of the informal economy (30% of GDP) with casinos, alluvial digging and contraband
- Problems with the management of public companies
- Lack of transport infrastructure (roads, ports)
- Difficult business climate, ineffective justice system
Zero growth affected by lower commodity prices and weaker performances in the agricultural sector
The country is expected to post zero growth in 2016. Activity will continue to be affected by the fall in commodity prices, mainly for gold, which represents 60% of exports, and aluminium (bauxite). The planned reduction in aluminium production at a plant belonging to the Alcoa group, in view of its impending closure, will also contribute to the slowdown. Moreover, agricultural performances, which rely heavily on rice and banana cultivation, are expected to remain weak: indeed the rice harvest needs to be revised downwards due to the drought conditions affecting the country, and the appearance of a bacterial disease is likely to result in lost banana output for the country of almost 40%.
The austerity policy conducted by the government since the re-election of President Désiré Bouterse is, meanwhile, likely to dampen domestic demand. Public and private investment is expected to slow, due to the drop in commodity prices, which has affected the collection of State revenues and which reduces the country's attractiveness. Household consumption is also likely to be hit by the decline in purchasing power associated with higher fuel taxes, the gradual removal of subsidies (water and electricity), slower bank lending as well as higher inflation because of the realignment of subsidised tariffs.
Fiscal consolidation necessary to bring down the public deficit
In 2015, the budget deficit widened due to the decline in income from ore extraction (over 40% of total income) and the government's expansionary policy implemented during the electoral period (higher wages and pensions), as well as unpopular reforms (in particular VAT reform). At the end of 2015, faced with slippage in the public accounts, the local authorities decided on a policy of fiscal consolidation, which is set to continue in 2016. This involves, in particular, another increase in taxes, lower subsidies and the VAT reform due to be adopted during the year for implementation from 2017. The authorities are also looking at the possibility of establishing a Sovereign Fund to hold any income surplus at times when mineral prices are high.
The worsening public deficit combined with the State's acquisition of a stake in the construction of a gold mine led to a surge in the level of public debt in 2015. In 2016, it is likely to rise further but will remain manageable.
Monetary policy is likely to remain prudent. Surinam's central bank will ensure that the Suriname dollar (Sr$) continues to fluctuate between USD 3.3 and 3.5 by making use of its foreign exchange reserves (about 2 months of imports, excluding significant gold holdings). These reserves are, however, still weak, hit by the decline in exports, which are the main source of foreign exchange inflows and so will limit the central bank's ability to intervene in the event of a significant external shock.
Reduction in the current account deficit driven by a decline in imports
In 2015, the worsening current account balance was linked, in particular, to the slowdown in exports on the back of lower commodity prices (mainly for gold and aluminium), while imports remained lively due to construction work on the new gold mine and the expansion of the refinery of Staatsolie, the state oil company. In 2016, the current account deficit is expected to narrow, thanks to a decline in imports linked to the completion of these works and an expected reduction in the energy bill following the start of operations at the refinery. Exports are still likely to be penalised by the fall in metal prices, mainly for gold, which represents over 55% of exports. FDIs, chiefly intended for the mining sector, are expected to remain weak (falling from about USD 70 million in 2011 to USD 11 million in 2014).
Continuation of unpopular reforms
President Désiré Bouterse (aged 70), leader of the National Democratische Partij (NDP), was re-elected President of Suriname by the National Assembly on 16 July 2015, despite the scandals surrounding him and his family (arms and cocaine trafficking, assassinations). With a bigger majority (26 seats out of 51), the president is expected to continue his programme of reforms aimed at reducing the public accounts deficit.
Internationally, relations between President Bouterse and the European Union and the United States remain tense. For some fifteen years, the former dictator has been accused of secretly supporting drug trafficking and money laundering. These allegations resurfaced when his son, Dino Bouterse, was sentenced to 16 years in prison in the United States in 2015 for arms and drugs trafficking, and for supporting the terrorist organisation, Hezbollah.
Limited access to credit, under-developed infrastructures and the lack of a skilled workforce will continue to hamper the business climate.
(Last update : January 2016 )