- World Bank data from 2017 and 2018 shows which countries invest heaviest in R&D.
- Some smaller countries are out-spending much larger economies in this area.
- R&D can help usher in a new, post-pandemic era of sustainable economic growth.
Investment in research and development (R&D) is the lifeblood of many private sector organizations, helping bring new products and services to market. It’s also important to national economies and plays a crucial role in GDP growth.
As we recover from the pandemic, R&D will play a key role in underpinning private sector growth and job creation, Christine Lagarde, President of the European Central Bank, said at the opening of the World Economic Forum's Pioneers of Change summit.
The World Bank analyzed the most recent available data on which countries spend the largest proportion of GDP on R&D activities. While the data predates the pandemic, it helps shine a light on how funding research can bolster economic competitiveness. The top five are: Israel, South Korea, Switzerland, Sweden and Japan.
Here is a summary of the top three nations in the World Bank’s list.
In 2018, Israel spent 4.95% of GDP on R&D, according to the World Bank. One of its most important economic sectors is technology. Its tech sector benefits from an influx of skilled, educated engineers and technicians who moved there in the early 1990s, according to the OECD.
Between 1960 and 2019, South Korea recorded GDP growth averaging 7.3% per year. Much like Israel, the country has a booming tech industry. It also has a large defence sector – its border with North Korea is one of the most heavily militarized places in the world. As well as impressive GDP growth, South Korea’s exports have been healthy too, growing by an average of 16% per year between 1961 and 2019. It spent 4.81% of GDP on R&D in 2018, according to World Bank data.
The data for Switzerland relates to 2017, when the landlocked European country spent 3.37% of GDP on R&D. The services sector is by far the biggest Swiss economic engine, generating almost three-quarters of total GDP. By comparison, agriculture is worth around just 1%, with the rest coming from industry. Switzerland’s main export market is the European Union – while not a member of the EU, it is party to a number of treaties that allow it to trade freely with EU nations. Among its main industrial sectors are pharmaceuticals, and of course watches – which keep 9% of exports ticking along.
Larger economies are lagging behind
The world’s two largest economies, the US (2.84%) and China (2.19%), are ranked at numbers nine and 13, respectively, in the World Bank list. Both figures are based on 2018 data.
Europe’s largest economy, Germany, comes in seventh, with 3.09% of GDP dedicated to R&D in 2018. One of Europe’s other large economies, the UK – which has decided to leave the European Union – is ranked 21st by the World Bank. Just 1.72% of GDP went toward R&D in the same year.
At the World Economic Forum’s Pioneers of Change Summit, leaders from the public and private sector will discuss the role of innovation in helping shape national economic growth. There will be a particular focus on how this can play a part in the Great Reset, following the global pandemic’s economic disruption.