major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||1.8||2.6||2.3||2.5|
|Inflation (yearly average, %)||22.0||6.9||5.5||5.8|
|Budget balance (% GDP)||-8.8||-7.1||-8.6||-8.9|
|Current account balance (% GDP)||1.9||-3.4||-6.1||-5.9|
|Public debt (% GDP)||74.6||72.1||72.3||74.6|
(e): Estimate. (f): Forecast.
- Mineral resources and agricultural potential (rice, wood)
- Support from international donors and foreign investors
- Undiversified economy: dependent on oil, gold and aluminium
- Large informal economy (30% of GDP) with casinos, gold panning and smuggling
- Difficulties in the management of state-owned companies
- Inadequate transport infrastructure (roads, ports)
- Difficult business climate, ineffective justice system
- Vulnerable banking sector: high share of non-performing loans and low profitability
Growth still supported by the extractive industries and investmentt
Growth will remain moderate in 2020, driven mainly by public investments, chiefly in infrastructure and health. Road and bridge upgrades and repairs, electrification and water management in Paramaribo and the districts, as well as housing construction all reflect this policy. The oil sector could attract new foreign investors thanks to the announcement by Staatsolie, the state-owned oil production company, of a new discovery with a potential 800 million barrels of recoverable oil. Staatsolie plans to issue a bond and list shares in New York or London in 2020 in order to raise between USD 1 and 2 billion to be used for future oil exploration. Nevertheless, domestic private investment is still expected to suffer from weakness in the banking sector arising from the absence of deposit insurance and shortcomings in crisis preparation and resolution, including inappropriate classification of provisions for banks’ non-performing loans.
Extractive industries (gold, bauxite, aluminium, oil) account for 88% of exports and 58% of GDP. Although world prices may slide, the 11% increase in gold production from the Saramacca mine in 2020, as the facility enters full production, will maintain the sector’s contribution to growth.
Inflation, although high, should not hinder private consumption (30% of GDP).
Significant risk of over-indebtedness
An amendment to the National Debt Act in November 2019 removed the 60% GDP ceiling on public debt, following persistently high deficits. Public debt is expected to increase accordingly. The domestic share (34% of total debt) has already risen after the central bank granted a loan of SRD 670 million to the government in March 2019. This was the first loan of this type since the memorandum of understanding signed in April 2016, which stipulated that the central bank would not finance the government. According to the approved budget, expenditure is expected to increase by 9.9% in 2020. Spending will be directed towards payment of the wage bill, social security, infrastructure and the organisation of elections. Revenues are also expected to increase by 12% due to higher gold production.
The current account deficit is expected to remain high in 2020. Total exports of raw gold (61%) are increasing with production, while total imports of capital goods (50%) are expected to go up with the launch of various infrastructure projects. The balances of services (11.6% of GDP) and investment income (11.2% of GDP) are structurally in deficit, but should remain stable. Expatriate remittances, which are maintaining the transfer surplus, are nevertheless set to decline in line with the difficult global economic environment. The current account deficit is still largely financed by FDI (4.2% of GDP), which is expected to increase in the hydrocarbon sector with the development of oil activity. This will support the Surinamese dollar, which has been in a flexible exchange rate regime since 2016. Foreign exchange reserves will be low, representing about three months of imports.
Double elections in 2020
With legislative and municipal elections scheduled for May 2020, the current President, Desiré Bouterse, leader of the left-wing National Democratic Party (NDP), was sentenced in December 2019 to 20 years’ imprisonment for the 1982 killings of 15 political opponents. However, the court did not issue an arrest order. This verdict could affect the President’s popularity in the lead-up to the elections, even if it remains high. After ten years in power, his political party could lose its slim majority due to voter fatigue. Nevertheless, he is expected to be re-elected, for which he will still need a two-thirds majority in the unicameral National Assembly.
Internationally, President Bouterse’s relations with the Netherlands and the United States will remain strained. For the past 15 years or so, the former dictator has been accused of secretly supporting drug trafficking and money laundering. Meanwhile, the border with French Guiana remains unclearly defined and continues to be a source of rivalry between the two countries, as shown by recent border incidents. As a result, since the beginning of 2019, the governments of both countries have been working to meticulously identify and determine the national ownership of islands.
Limited access to credit, underdeveloped infrastructure and a lack of skilled labour will continue to be a drag on the business environment. Suriname is placed 162nd out of 190 in the World Bank’s Doing Business 2020 ranking.
Last update: February 2020