Suriname Economic Outlook 2020 and Beyond
The economy of Suriname continues to grow steadily with low inflation, but remains vulnerable due to fiscal imbalances and a lack of urgently needed reforms. The fiscal position is likely to weaken further due to the upcoming elections in May 2020.
It is expected that the recent offshore oil discovery of Apache/Total in Block 58 and further offshore exploration activities of Petronas, Tullow and Kosmos Energy may have a positive impact on the mid-term outlook. The same actually counts for the planned investments of Iamgold and Newmont in respectively their Saramacca Project and Sabajo Project.
Real GDP is expected to expand annually by 2¼ to 2½ percent until 2024. The fiscal deficit will rise to almost 9 percent of GDP in 2020. Public debt is forecasted to move steadily upward from 75 percent of GDP in 2020 to around 87 percent of GDP by 2024.
There is a fiscal tightening program under consideration to achieve significant reduction in the fiscal deficit. This includes the introduction of a 15 percent VAT in late 2021, which will replace the current 8-10 percent Sales tax; improved revenue and customs administration and the curtailing of electricity subsidies.
International reserves, which currently are assumed to be very low in real terms, are projected to steadily increase to 3.3 months of imports in 2024. Inflation is expected to remain low at around the current 5% until 2024 albeit with a temporary increase from the introduction of the VAT in late-2021. The unemployment rate which is forecasted on 6.3 percent for 2020 is estimated to decline further in the coming years.
The banking sector face important downside risks and there still are gaps in the Central Bank’s supervisory and resolution framework. The recent public turmoil around an unaccountable amount of approximately USD 100 mio from the FX reserves of local banks, which are held under management of the Central Bank and the alleged misuse of Central Bank funds by the former bank governor, has severely affected the credibility of the Central Bank.