1. NS4540 Winter Term 2016 Economies of Surinam and Guyana
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. Suriname Overview Population 541,638 Economy based on
Gold mining,
Bauxite,
Petroleum and
To a lesser extent agriculture
In 2013 gold alone accounted for 62% of goods exports, alumina for 14% and petroleum for 15%
Gold produced
13% of government revenue in 2012, and
Oil a further 25%, but
bauxite and alumina only 2%

3. Suriname Economy I
Until recently Surinam had enjoyed macroeconomic stability with low inflation and a stable currency since 2000
Up to the last several years the country has had
a positive trade balance, and
healthy public finances,
largely because of strong gold and petroleum prices and expanding production
The informal and “parallel” economy including illegal drugs transshipments is also of some significance
However the performance of the agricultural sector has been weak

4. Suriname Economy II Major Concerns
Over the development of bauxite deposits, and
Surinam’s economy remains susceptible to boom and bust cycles cause by variations in gold, petroleum and bauxite prices
Tax receipts Suriname receives from its three main commodity exports provides the revenue to support a large pubic sector which employed 49,700 of the working population of about 100,000 in 2010
Cost of public sector increased significantly following salary restructuring in 2010 that raised pubic sector salary bill from 12% of GDP to 19.6%

5. Suriname Economy III
In the economy grew at an average annual rate of 4.5 with growth at 5.3% (2011), 3.0% (2012), 2.9% (2013) and 3.4% in 2014
However growth is expected to slow further as a result of the decline in gold and oil prices
GDP per capita reasonably high at $9,584 in 2014
However estimated that 70% of the populations lives in poverty
Suriname ranked 100 of 186 countries in the U.N. Human Development index
Within the Caribbean Community and Common Market only Guyana in 118th place ranked lower

6. End of the Commodity Boom
Shawn Donnan, “From Boom to Bailout”? Financial Times, February 5, 2016
Suriname has been riding the commodity boom since the start of the 21st century
Bauxite, gold, oil and bananas.
From 2000 to 2014 annual per capita income more than quintupled to almost $10,000
Child mortality fell by a third
In January 2016 however after watching foreign reserves more than half in 2015 – asked for help from the IMF, World Bank and other institutions
Set out on a path to an international bailout.

7. Assessment The IMF has focused on
improving the business climate to diversify the economy so that it is less susceptible to external developments
Moderating increases in public sector salaries
Strengthening the revenue base with implementation of a VAT
Restraining expenditures below the rate of growth in nominal GDP.

8. Guyana Overview
Country rich in natural resources yet one of the poorest nation in western hemisphere
121 out of 187 countries in the Human Development Index
Per capita income US$3,748 also lowest in region and 21% below next lowest Belize
Population of 747,884 mainly along the coast with the interior almost uninhabited
2002 to 2012 outmigration of 124,800 mainly to North America
Severe economic crisis in late 1970s and 1980s accompanied by
a rapid deterioration in public services, infrastructure and quality of life
Basic consumer goods unavailable except on the black market and
Real wages in steep decline

9. Guyana Economy I
A period of rapid growth in the 1990s, followed by almost 20 years of relative stagnation
After years of state-dominated economy international pressure forced country to launch in 1987 an Economic Recovery Program incorporating market-oriented reforms and liberalization
Move towards an open economy continued after free elections in 1992
average annual growth reached 7%
Reforms
Removed most price controls
reduced state’s role in economy
Encouraged foreign investment
Enabled country to service foreign debt and
Large scale privatizations of state-owned businesses

10. Guyana Economy II In addition In addition to the 7% annual growth rate
Laws regarding mining and petroleum exploration were improved and
An investment policy receptive to foreign investment was announced.
In addition to the 7% annual growth rate
Inflation declined to single digits from 1995 and
The currency stabilized while
Fiscal and external imbalances were reduced
However by 1998 the recovery was exhausted and the effects of long-run structural vulnerabilities became apparent
Also Investor confidence was damaged by political disturbances following the 1997 election

11. Guyana Economy III Growth was also hindered by
A lack of private sector activity
The ongoing migration of professionals to North America
Problems with the implementation of structural reforms
While financial stability was broadly maintained
Annual growth averaged 0.3% from
Economy contracted in four of these eight years
In early 2005 extensive flooding in the coastal areas were most of the population live caused considerable damage
Sugar and rice production was badly affected
GDP contracted by 2%

12. Guyana Economy IV
Emerging from this unpromising environment, economy made a recovery in 2006 (5.1%) and 2007 (5.4%)
Guyana qualified for an additional US $189m under the Multilateral Debt Relief Initiative in 2006
Following debt relief of $585m under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in 2003
GDP slowed to 3.1% in 2008 and averaged 4.5% , reaching 5.2%in 2013 largely due to higher gold prices
Growth slackened to 3.9% partly because of lower gold prices

13. Guyana Economy V Indications of structural problems became apparent
Central Government’s overall financial deficit was equivalent to 5.5% of GDP in 2014 – increase from 3.5% in 2005
IMF: country needed fiscal consolidation and structural reforms to strengthen debt sustainability

14. Outlook I
Coalition Government that took office in May 2015 faced multiple economic challenges
uncertainty over international gold prices and
weak outlook for bauxite, sugar and some other basic industries
Country had slow growth but maintained macroeconomic stability as the result of
Recent debt forgiveness as well as
Continuing development assistance due to good relations with major aid donors
Continuing forward commitments for grants and loan assistance from IDB, the EU and other agencies as well as from Petrocaribe

15. Outlook II However economic base remains narrow
Four commodities make up bulk of export revenue and
Gold alone providing more than 40%
Situation leaves Guyana vulnerable to price fluctuations and weather-related risks
Large scale mining investments appear to be on hold due to uncertain commodity prices
U.S. Department of State has also noted a clear influence of drugs-transshipment on the economy – extent unclear
Sugar industry has only a fair prospect for survival
Ending of the EU sugar protocol and
Scheduled removal in 2017 of sugar quotas from traditional importers

16. Outlook III For the future continuing need to address
Issues of management efficiency,
Transparency and
Good governance.
Coalition government elected in 2015 will need to address
Political polarization and
Lack of trust
Both have severely harmed country’s ability to make progress with large-scale investment projects