Suarez has shone for the Reds in 2013-14 after starting the campaign with a ban after biting Chelsea defender Branislav Ivanovic towards the end of last season and has scored 23 times in 19 Premier League matches.
Forlan, who recently joined Japanese outfit Cerezo Osaka, feels the 27-year-old could break the pattern of Lionel Messi and Cristiano Ronaldo winning the Ballon d'Or if he maintains his current level.
"His chances of winning are high if he keeps performing as he is now," Forlan, 34, told Perform.
The former Manchester United and Atletico Madrid attacker is in line to feature in his third World Cup later this year, with Oscar Tabarez's side hoping to improve on their run to the semi-finals at the 2010 tournament.
Despite being face a stiff challenge in order to progress to the knockout rounds again after being grouped with England, Italy and Costa Rica in Group D, Forlan believes Uruguay have the ability to progress.
"No doubt it is a very good attack we possess, but there are others that have good attackers too," he continued.
"We have a good foundation after years playing together. Now we have more experience after a good World Cup in South Africa plus a trophy won at the Copa America [in 2011].
"We have good players and hopefully we will perform well even though our group is not easy.
"It is a difficult group, but I think that we are on a par with each other: Costa Rica, England, Italy and Uruguay. All of us look sideways."