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IMF says Suriname economy growing yet diversification needed

The International Monetary Fund (IMF) last week gave Suriname’s economy high praise for its economic growth and low inflation. However, the IMF expressed concerns about the size of the public debt, the resumption of monetary financing of the budget and vulnerabilities in the financial sector.

The International Monetary Fund headquarters in Washington, DC.

Further, in the conclusion of its 2019 Article IV consultation with the nation, the IMF urged Suriname’s government to diversify the economy and install structural reforms.

Under Article IV of the IMF’s Articles of Agreement, the global financial institution holds bilateral discussions with members, usually every year. A staff team visits the country to collect economic and financial information and discuss with officials the country’s economic developments and policies.

“Suriname’s economy is growing steadily with low inflation. Real GDP (gross domestic product) grew by 2.6 per cent in 2018, following 1.8 per cent in 2017,” said the IMF report which continued “Activity growth has been broad based with expansions in wholesale and retail trade, construction, hotels, restaurants, and manufacturing, while mining has remained stable.”

“Inflation has fallen below 5 per cent mainly arising from exchange rate stability and control over excess liquidity. The unemployment rate was 7.6 per cent in 2017 and is expected to have declined further in 2018.”

– IMF Report

The IMF said that “Inflation has fallen below 5 per cent mainly arising from exchange rate stability and control over excess liquidity. The unemployment rate was 7.6 per cent in 2017 and is expected to have declined further in 2018. Real GDP is expected to expand annually by 2¼ to 2½ per cent during 2019−24, while inflation is expected to remain low. However, the balance of risks to this outlook is negative, mainly due to fiscal imbalances. The overall fiscal deficit is expected to reach 8.6 per cent of GDP in 2019 while public debt remains high at around 72 per cent of GDP.”

That said in the IMF report, “Executive Directors took positive note that the Surinamese economy is growing steadily, with a falling unemployment rate, low inflation, and a stable exchange rate. They stressed that this stabilisation presents an opportunity to address the central challenges facing the economy, including a weak fiscal position and rising public debt, monetary and financial supervision frameworks that need to be enhanced, a low degree of economic diversification, and other structural impediments to growth. Timely action will be necessary to reduce macroeconomic vulnerabilities and downside risks.”

Paramaribo, Suriname. (Photo: flyalways.com)

The IMF Directors noted that important vulnerabilities remain in the financial sector. It noted the importance of diversifying the economy and implementing structural reforms to boost potential growth.

What’s more, it said addressing the high costs of doing business, reforming the investment framework, and strengthening governance will be important to support investor confidence. Investment in education and labour market reforms, combined with a meaningful safety net for the unemployed, will also be important. Directors were encouraged by recent laws on the minimum wage and the enhancement of maternity and paternity support. They welcomed the authorities’ commitment to strengthen governance in the extractive sector.