Suriname - Economy
Real GDP was expected to rise 2.5 percent in 2020. An unexpected bonus was a large offshore oil discovery in January 2020 by Apache and Total, holding out the prospect for a major boost to the national economy, much as what is occurring in neighboring Guyana.
The economy is dominated by the bauxite industry, which accounts for more than 15% of GDP and 70% of export earnings. The public sector, which is plethoric (120 public enterprises, representing 55% of formal employment), is slow to be reformed. The economy lacks diversification. The weight of the informal economy remains considerable (30% of GDP), in particular that of activities outside the legal framework (22 casinos, 33 exchange houses for 200 000 tourists, smuggling, drug trafficking).
After 99 years, US aluminum giant ALCOA closed its operations in Suriname in November 2015. Alcoa stopped production at the Suralco refinery, which had an annual refining capacity of 2.2 million metric tons, due to dwindling bauxite ore supply.
On 01 March 2017 international rating agency Fitch downgraded Suriname's credit rating from B + to B-, with a negative outlook. This was mainly due to international commodity prices remaining in the doldrums, reduced mineral income, and unfavorable fiscal measures. The exchange rate policy adjustment led to currency devaluation, resulting in high inflation. Suriname's 2016 economic contraction of about 10%, was expected to continue with economic recession in 2017.
The economy of Suriname is essentially primary. It is based on the production of bauxite, gold and oil, accounting for 30% of GDP, 80% of exports and 35% of tax revenues. The agricultural sector (banana, rice and timber) accounts for 5% of GDP but occupies a quarter of the population. The steady growth of its GDP between 2010 and 2014 (about US $ 9500 / inhabitant) brought the country back to the middle income category. Average per capita income increased by one third between 2006 and 2014 (USD 9,540).
The government exerted considerable control over the news media. During the colonial era, a plantation economy, based on the production of cocoa, coffee, sugar, and cotton, was established. The system was supported first by African slave labor, and then by Asian contract agricultural laborers. Suriname's current economy is based largely on the mining, processing and exporting of bauxite. The bauxite industry is dominated by the Suriname Aluminum Company, a subsidiary of the Aluminum Company of America, and by the Royal Dutch Billiton Company, a Shell owned enterprise. Although Suriname continues to have a predominantly free market economy, state control increased since 1980.
Before 1980 Suriname's balance of payment position was strong, but following the military takeover, the country's international financial situation deteriorated. An increase in the bauxite levy decreased export earnings, and in 1982 the Netherlands withdrew development assistance from Suriname in order to protest the government's use of repressive measures to quell political unrest. The US also withdrew military and financial assistance in 1982. In 1982, exports totaled US$336 million and imports totaled US$449 million. In 1983, the gross domestic product (GDP) was US$1062 million, and the per capita GDP was US$2820. 29% of the work force is engaged in agriculture, 15% in industry and commerce, and 42% in government. The literacy rate is 65%, life expectancy is 68 years, and the infant mortality rate is 23/1000.
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.
The Surinamese economy began to weaken in 1999 and, in a response designed to restimulate it, Jules Wijdenbosch, the incumbent leader, loosened monetary and fiscal policies which generated a large amount of public debt. Rather than spend the raised debt on productive investment, however, he chose to spend it on civil service wages which generated inflation.
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 depended on renewed commitment to responsible monetary and fiscal policies and to the introduction of structural reforms to liberalise markets and promote competition.
Wijdenbosch chose not to run in the 2000 election that saw his closest rival in the previous election, Ronald Venetiaan, become the new incumbent. 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 helped Suriname to access international development financing.
In 2000, the World Bank ranked Suriname as the 17th richest country in the world in terms of natural resources. Suriname continued to be one of the world’s leaders in the production of bauxite and was a growing producer of crude petroleum and gold. Geographically, Suriname is positioned within the Guiana Shield; this region in northern South America is well known for its untapped resources of copper, gold, iron ore, manganese, nickel, platinum, and uranium.
The shortage of affordable energy continues to hamper the expansion of the industrial sector in Suriname. The largest companies in the gold and bauxite sector, as well as larger manufacturing companies, run their operations primarily on diesel-powered generators. SURALCO indicated that any expansion of operations to include mining and refining reserves in western Suriname will depend on Suriname expanding its energy-generating sources. The primary energy sources Suriname has at present are the Afobakka Hydro Dam, with an installed capacity of 180 megawatts (MW); a diesel generator power plant owned by the State Electricity Company with a capacity of 45 MW; and a diesel generator plant owned by Staatsolie with a current capacity of 14 MW, which Staatsolie plans to expand to 18 MW. There is no indication that the Ministry of Natural Resources has any immediate plans to work on the expansion of the energy supply of the country.
The government’s efforts to privatize three parastatals stagnated. Both the wood processing company Bruynzeel and the rice company SML were taken off the market. Privatization of the banana company, SBBS, may still move forward. After putting SBBS up for bid, the government entered into negotiation with the Belgian international fruits and vegetables conglomerate Univeg Group.
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