Caribbean Export OUTLOOK 2016 - 2017

Pulse OF THE CARIBBEAN

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

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

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

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).

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.

The economy is expected to grow by a fairly healthy 2.7% in 2015 and 3.8% in 2016.

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 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

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.

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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