The global crisis that started in 2008 has significantly changed the economic environment in which firms operate across the world. The problems faced by companies have changed, while governments in many countries were forced to focus on the consolidation of public financing and the implementation of reforms to improve their countries’ competitiveness.
The Executive Opinion Survey, part of the Global Competitiveness Report 2015-2016, provides a tool to monitor what firms in each country consider to be the greatest impediment to their business activities. Respondents are asked every year to identify and rank the five most problematic factors for doing business in their country.
A comparative analysis of the results from 2007 and 2015 can help us understand how the global financial crisis has created new obstacles for doing business across the world, highlighted previously existing weaknesses and changed the priorities of firms in countries at all stages of development.
The most striking change is the surge of access to finance as a problematic factor for business in many countries, a consequence of the global financial crisis.
Due to deleveraging, stricter regulations and uncertainty, and despite extremely low interest rates, obtaining finance is still very difficult, especially for SMEs. In advanced economies, firms surveyed in 2015 indicate this factor as the fourth most pressing concern, with a score of 10.8 (28.1 in Ireland, where almost every respondent has identified this as the most problematic factor for doing business).
This has more than doubled since 2007, when it was only seventh with a score of 5.1. Access to finance is now almost as problematic in advanced economies as developing ones, where it has risen from third in 2007 to become the number one priority.
Tax rates also climbed the priority list in both advanced and developing economies. In their quest for a reduction of debt and deficits, governments in many countries have implemented austerity measures including new taxes that further depressed business activity.
The analysis also reveals the persistence of institutional factors as top priorities in most economies, showing how difficult countries at all levels of development find it to improve their institutional framework. Government bureaucracy is still the number one priority in advanced economies and remains one of the three most pressing issues in developing economies, where corruption – another factor related to governance – ranks second on the list. Corruption has gained in prominence, especially in countries where recent scandals have exposed its economic costs, such as Brazil, Italy, Mexico, Nigeria, Spain and Hungary.
Finally, within the eurozone, the relative level of concern among business leaders about restrictive labour regulations has progressively decreased in Southern Europe, where it’s now at par with Eastern European countries. This is due to the effect of the reforms implemented in those countries as well as to the increase of access to finance as the most problematic factor for business in Southern Europe, largely outweighing concerns about the labour market.
The Global Competitiveness Report 2015-2016 is available here.
Author: Attilio Di Battista is a Quantitative Economist on the Global Competitiveness and Risks team at the World Economic Forum.
Image: The City of London business district is seen through windows of the Royal Bank of Scotland (RBS) headquarters in London, Britain September 10, 2015. REUTERS/Toby Melville