South America and South Atlantic Islands

Suriname
Last reviewed: 4 July 2008

Country information

See entire profile

ECONOMY

GDP: Sr$5,802m (US$2,149m) (2006, EIU)
GDP per head: Sr$11,841 (US$4,386) (2006, EIU)
Annual Growth: 5.8% (2006, EIU)
Inflation: 8.5% (May 2007, EIU)
Major Industries: bauxite and gold mining, alumina production, logging, food processing, fishing in 2006 UK exported £9.6 million of goods / UK imported £5.4 million of goods to the market.
Major Export Partners (2005): Norway 23.6%, EU 23.4%, US 16.5%, Canada 16.1%
Major Import Partners: US 29.3%, EU 29.1%, Trinidad & Tobago 12.7%, China 6.5%

By the end of 1997, the allocation of new Dutch development funds were frozen as Surinameese Government relations with the Netherlands deteriorated. Economic growth slowed in 1998 with decline in the mining construction and utility sectors. Rampant government expenditures, poor tax collection, a bloated civil service and reduced foreign aid in 1999 contributed to the fiscal deficit, estimated at 11% of GDP. The government sought to cover this deficit through monetary expansion, which led to a dramatic increase in inflation and exchange rate depreciation. Suriname's economic prospects depend on renewed commitment to responsible monetary and fiscal policies and to the introduction of structural reforms to liberalise markets and promote competition.

Venetiaan's Government began an austerity program, raised taxes, and attempted to control spending. This led to a stable exchange rate, slowing inflation and strong foreign investment. This, together with strong prices for Suriname's principal commodities has led to a steady upturn in the economy. The Dutch Government resumed aid, which has helped Suriname to access international development financing. The Netherlands has recently forgiven €70m in debt owed to the Dutch development bank.

The economy is dominated by the bauxite industry, which accounts for more than 15% of GDP and 70% of export earnings. After assuming power in 1996, the Wijdenbosch Government ended the structural adjustment program of the previous government, claiming it was unfair to the poorer elements of society. Tax revenues fell as old taxes lapsed and the new government failed to implement new tax alternatives.

Growth expanded at a rate of 5.8% in 2006 due to strong rises in investment in mining, oil and the informal sector. This growth rate is expected to decline slightly in 2007, but stay above the 5% mark. However, further investment in the bauxite industry has been mooted and could push this figure up again. The outlook for the on-shore oil industry is good with drilling being undertaken. Off-shore exploration projects are well advanced but drilling is unlikely in the short- to medium-term. Gold output fell slightly in 2006, but new reserves have been identified in the east of the country.

Agriculture is a major employer, and therefore key to the economy, but the outlook does not look good. The banana industry looks healthier after a restructuring programme, but the uncertain future of the EU banana regime is a concern. The industry also benefited from the first-come-first-served proportion of the EU’s overall quota. The rice industry has a huge debt and suffers from high costs, as well as being threatened by a phasing out of EU trade preferences. The state owned rice company was closed in July. The only bright spot is a palm oil plantation, funded by China, may move ahead and provide employment opportunities and improve the sector’s long-term outlook.

In May 2007, there was a proposal to increase taxes on gambling facilities by 300%. In addition, casinos pay a 50% corporate tax rate (compared to 36% for other business). However, many casinos do not pay income tax, claiming they are not profitable.

New telecommunications legislation, introduced in April 2007, partly liberalises the market with a new regulatory body being formed. The need for further infrastructural investment in the sector was highlighted by a two-week disruption in May, following damage to a fibre-optic cable. Heavy rains allowed the generation of extra electricity in June and July, which was sold at a much cheaper rate than normal.

Inflation rose sharply in the second quarter of 2007, largely due to significant increases in the price of local food after heavy rainfall in April and May. Inflation is likely to remain volatile and on an upward trend.

In May, Suriname was given a B in the Fitch credit ratings system, with both local- and foreign-currency areas having stable outlooks. Suriname was noted to have modest debt levels and an improved fiscal position, although the economy is still vulnerable to external shocks.