Caribbean Export OUTLOOK 2016

The clear victory for President Dési Bouterse and

his Nationale Democratische Partij (NDP) in the

May 2015 general electionwas a vindication of the

economic programme of the previous NDP-led

coalition government. On assuming office in2010,

it implemented a number of keymacro-economic

reforms, while also dealingwith several important

underlying social issues related to poverty and

inadequate access to health and education services.

Reforms included unifying the foreign exchange

market, restoring price stability (inflation is

under 5%), and strengthening the regulation

and supervision of

the financial sector. In

addition, credit streams to

theprivatesectorgrewand

the tax base is anticipated

to be broadened with the

implementation of a

Value Added Tax (VAT).

The economy was also supported by record

royalty payments from Suriname’s major mining

operations, and new foreign investment in this

sector (for example, the building of a gold refinery).

In addition, the government undertook a number

of high-profile infrastructure projects, including

paving themain east-west road and increasing the

affordable housing stock.

In relation to the overall economy, growth rates

have been relatively high – certainly compared

to other countries within CARICOM – with

expansion of 2.9% in 2013 and 3.5% in 2014.

All sectors contributed positively to growth in

2014, except mining and quarrying. Mining,

although a key sector, was affected by lower

commodity prices, including for gold which

contributes approximately 18.5% of the country’s

GDP, and the depletion of bauxite mines in the

south of Suriname. The best performers were the

small hotel and restaurant sector (7.4%) and the

construction sector (6.8%).

In addition to maintaining a growing economy,

the government has made significant efforts to

improve the living standards of many working-

class families. This was done through a range of

reforms, such as increasing pensions fromUS$78

to US$145 a month; raising the monthly child

allowance from under a dollar to over US$13;

passing theMinimumWage Act; and introducing

free school meals and after school care. As a result,

many Surinamese have seen real improvements in

their standards of living.

The economy is expected to growby a fairlyhealthy

2.7% in2015 and3.8% in2016. But there are some

concerns about aspects of the economy looking

forward. Suriname’s high dependence on gold for

its foreign exchange earnings is an area of weakness

– gold amounted to 57% of total goods exports in

2012.Ifcommoditypricesremainsubdued,thenas

happenedinthelastcoupleofyears,exportearnings

will decline. This, in turn, will have an impact on

government revenues and the current account

whichmovedintodeficitin2013and2014.Foreign

currencyreserveshavealsobeenplacedundersome

pressure – reserves have dropped from over US$1

billion in 2011 to under US$500million today.

The increased level of social spending that

has taken place in recent years has, of course,

exacerbated the situation. Relatedly, the

number of workers employed by the state has

risen – more than 60% hold public sector jobs

– and that is an added burden on government

expenditure. Further, the government has

taken an increasing stake in key sectors such

as gold, oil, and bauxite, which will place

greater obligations on the state to provide the

required investment, although there are plans

to privatise some state enterprises and improve

the management of others. Nonetheless, the

cumulative effect of higher

spending and lower revenues has

been an increase in government

debt. Indeed, debt is expected

to increase from 30% of GDP in

2013 to 40% by 2019.

President Bouterse showed

in his first term that it is possible to strike a

balance between investing in social programmes

and managing the economy is a generally

effective and pragmatic way. It is likely that

this approach will be maintained, and it might

be easier to do this without the competing

interests of a multi-party coalition as existed

previously. However, there are warning signs

and it would not take much – a further decline

in commodity prices, for example – to knock

the economy off balance. Moreover, according

to Transparency International’s Corruption

Perception Index of 2014, Suriname was ranked

100th out of 175 countries, demonstrating

that greater attention needs to be placed on

good governance. This would ensure that any

gains made at the economic level are managed

effectively.

The economy is expected to grow by a fairly

healthy 2.7% in 2015 and 3.8% in 2016.

Dr. Peter Clegg is a Senior Lecturer in Politics at the University of the West of England, Bristol. He has been a Visiting Fellow at the Institute of Commonwealth Studies

in London, and a Visiting Research Fellow at the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the University of the West Indies in Jamaica.

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