Since 1979, the World Economic Forum has been taking the temperature of long-term economic growth and productivity in its Global Competitiveness Report.
The latest edition covers 141 economies, accounting for 99% of the world’s GDP – and finds that a decade on from the global financial crisis, most economies are still stuck in a cycle of low productivity growth.
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But those economies that bring everyone along together, investing in reskilling the workforce and boosting infrastructure, will be best able to withstand a global slowdown.
As the Forum’s Founder and Executive Chairman Klaus Schwab says: “Those countries that integrate into their economic policies an emphasis on infrastructure, skills, research and development, and support those left behind, are more successful compared to those which focus only on traditional factors of growth.”
What do we mean by ‘competitiveness’?
What is economic competitiveness? The World Economic Forum, which has been measuring countries' competitiveness since 1979, defines it as: “the set of institutions, policies and factors that determine the level of productivity of a country." Other definitions exist, but all generally include the word “productivity”.
The Global Competitiveness Report is a tool to help governments, the private sector, and civil society work together to boost productivity and generate prosperity. Comparative analysis between countries allows leaders to gauge areas that need strengthening and build a coordinated response. It also helps identify best practices around the world.
The Global Competitive Index forms the basis of the report. It measures performance according to 114 indicators that influence a nation’s productivity. The latest edition covered 141 economies, accounting for over 98% of the world’s GDP.
Countries’ scores are based primarily on quantitative findings from internationally recognized agencies such as the International Monetary Fund and World Health Organization, with the addition of qualitative assessments from economic and social specialists and senior corporate executives.
Singapore tops the rankings of most competitive economy this year, with 84.8 out of 100.
It has improved in all but two pillars since last year. As the above chart shows, it comes first for infrastructure, health and its labour market, and second for institutions, financial system and product market.
But it scores 124th on the Freedom of Press Index and, as the report notes, “in order to become a global innovation hub, Singapore will need to promote entrepreneurship and further improve its skills base”.
2) United States
The US remains the most competitive large economy in the world, coming in at second place.
It’s an innovation powerhouse, topping the rankings for business dynamism and coming second for innovation capability.
But within the product market pillar, domestic competition has dropped six points since 2018, while trade openness is more than four points lower.
3) Hong Kong
Hong Kong has climbed four places to third this year – and it ranks first on four pillars, the most of any economy. On both health and macro-economic stability, it has near-perfect scores of 100, and tops the product market and financial system rankings.
However, the report notes its “biggest weakness is undoubtedly its limited capability to innovate”, the pillar on which it comes 26th. And in the labour market pillar, it’s penalized for the lack of workers’ rights protection (coming 116th).
Up two places from last year, the Netherlands has overtaken Germany as Europe’s most competitive economy, scoring 82.4.
It scores highly for macro-economic stability, infrastructure and business dynamism, but comes 24th for ICT adoption, showing it has more to do to fully harness the opportunities afforded by the Fourth Industrial Revolution.
Switzerland drops one place to fifth this year, but performs highly in the human capital pillars of health (5th) and skills (1st). It’s the best in the world for employability of graduates and on-the-job and vocational training.
It comes third for innovation capability behind Germany and the US – but it ranks last (141st) for the complexity of its tariff regime.
Japan ranks third in the East Asia and Pacific region, and sixth overall, down one place from 2018 among the most competitive economies in the world. It scores highly for health (1st) and infrastructure (5th) and benefits from large domestic and export markets (4th for market size).
Across all pillars, it performs consistently, with no score under 70, but within the skills pillar, where it comes 28th, it comes 87th for the teaching of critical thinking. It also has low female participation in the labour market, with 76 women for every 100 men.
In part due to dropping one point on its overall score, Germany slips four places to rank seventh this year. In more than half (53) of the 103 indicators, it has lost points, but gained ground in 18.
It’s still the world’s best innovator, but surprisingly, it falls below the OECD average for ICT adoption, with less than 1% of people subscribed to fibre-optic broadband.
Sweden is the fourth most competitive economy in Europe, and eighth overall. It has a consistently stable economy, a high rate of ICT adoption and is innovative: scoring highly within the innovation ecosystem pillars of innovation capability (5th) and business dynamism (6th).
It’s held back by the size of its domestic and export market (40th) and labour market (22nd).
9) United Kingdom
The UK comes ninth this year, down one space from last year. Like most of the top 10 competitive economies of the world, its biggest strength is macro-economic stability.
It has a highly educated workforce (11th for skills), but its rate of ICT adoption (31st) is low by OECD standards – and it comes 29th for digital skills among its workforce.
In 10th place again, Denmark has improved its performance this year in 10 of the 12 pillars, with its financial system and institutions recording the most progress.
It also benefits from a stable economy, modern skills (3rd), a robust labour market (3rd) and widespread ICT adoption (9th). But it has reduced R&D investment and if it relaxed regulations on hiring foreign labour and wages, it could have the world’s most efficient labour market.