Financial and Monetary Systems

Europe’s top 10 most competitive economies

Thierry Geiger
Head, Benchmarking Practice, World Economic Forum Geneva
Beñat Bilbao-Osorio
Head, Frontier Insights, World Economic Forum
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Competitiveness Framework

Six European countries feature in the top 10 – with others in the top 20 – of the global rankings in the World Economic Forum’s Global Competitiveness Report 2013-2014, which assesses the competitiveness of 148 economies around the world. The performance of the 10 most competitive economies in Europe are found below:

1.     Switzerland once again retains its 1st place thanks to a strong performance across the board. The country’s most notable strengths are related to innovation and labour market efficiency as well as the sophistication of its business sector. Switzerland’s top-notch scientific research institutions, along with other factors, make the country a leading innovator.

2.     Finland retains its 3rd position. Similar to other Nordic countries, Finland boasts well-functioning and highly transparent public and private institutions. The country also benefits from a strong education and training system that provides the workforce with the skills needed to adapt rapidly to a changing environment and develop an excellent innovation capacity.

3.     Germany came in 4th place, benefitting from high-quality infrastructure across all modes of transport. The goods market is efficient and characterized by intense local competition and low market dominance by large companies. Moreover, the sophistication of German businesses is high and they remain among the most innovative in the world with high investments in R&D.

4.     Sweden places 6th and continues to provide favourable conditions for innovation-led growth, with very transparent institutions, efficient markets and high investments in R&D and other innovation-related investments. Combined with a strong focus on education over the past years and high levels of technological readiness makes Sweden one of the most productive economies in the world.

5.     The Netherlands, at 8th, remains a highly productive economy, despite emerging weaknesses in its financial sector. Overall, businesses are sophisticated and innovative and the country is rapidly and aggressively harnessing new technologies for productivity improvements. Its excellent educational system and efficient functioning markets also contribute to the country’s high level of competitiveness.

6.     The United Kingdom is 10th, benefitting from clear strengths such as the efficiency of its labour market, a well-developed financial system, and sophisticated and innovative businesses that extensively use information and communication technologies. The country’s macroeconomic environment represents the greatest drag on its competitiveness potential.

7.     Norway, at 11th place, like other Nordic countries, benefits from well-functioning and transparent public institutions and efficient markets. In addition, its macroeconomic stability and the strong uptake of new technologies, notably ICT in the past years, have significantly contributed to boost the country’s competitiveness edge. Further improvements in infrastructure and greater levels of competition could further enhance its competitiveness.

8.     Denmark, at 15th place, follows in the regional ranking. Despite the weakening in its macroeconomic environment, the country continues to benefit from one of the strongest institutional frameworks. Moreover, its first-rate higher education and training system, coupled with high levels of technological uptake and innovation, greatly contribute to the strong Danish competitiveness edge.

9.     Austria, in 16th place, benefits from excellent infrastructure and sophisticated businesses that are highly innovative. In addition, a well-performing education and training system effectively prepares the workforce, particularly through a strong focus on on-the-job training. A more flexible labour market would help boosting the country’s competitiveness.

10.  Belgium, in 17th position, closes the European Top 10. An excellent educational system with top-notch business schools, a strong propensity for on-the-job training and a high level of competition in the goods market contribute to a sophisticated and innovative business environment. Reversing the current macroeconomic weaknesses that continue to represent a burden on competitiveness, and a distortionary tax system, which particularly reduces the incentives to work, would help strengthen the country’s competitiveness edge.

While many European countries performed well on the report’s Global Competitiveness Index (GCI), others have room for improvement. Southern European economies such as Spain (35th), Italy (49th), Portugal (51st) and notably Greece (91st) all need to continue addressing weaknesses in the functioning and efficiency of their markets, boost innovation and improve access to finance in order to help bridge the region’s competitiveness divide.

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Authors: Beñat Bilbao-Osorio is Associate Director and Senior Economist of the Global Competitiveness and Benchmarking Network at the World Economic Forum. Thierry Geiger is an economist and associate director with the World Economic Forum’s Global Competitiveness Network, where he leads the Asia competitiveness practice.

Image: An overview picture shows the Jet d’Eau (water fountain), and the Lake Leman from the St-Pierre Cathedrale in Geneva REUTERS/Denis Balibouse
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