Global competitiveness is not all about the economy. The latest index shows how countries measure up for potential growth, according to factors that also consider societal goals and technological readiness, as scored by the WEF.
In a time when globalisation’s effect on society is increasingly being called into question, a country’s potential should be measured not just by its economy through GDP, but in conjunction with other factors that determine societal goals and competitiveness, according to the Global Competitiveness Report 2017-18 from the World Economic Forum.
Its most recent analysis of over 130 countries’ potential to grow economically, distribute that economic gain, treat the environment sustainably and consider future generations, acknowledges signs of recovery in the global economy, but finds three key challenges. While low interest rates are helping to speed up economic growth, they are not expected to return to previous levels, it states, and the financial sector remains vulnerable, with greater private debt in emerging economies and growth of non-regulated capital markets.
Emerging economies are increasingly able to innovate, with China, India and Indonesia becoming centres of innovation, but to benefit, they need to prepare their businesses to adopt new technology widely.
A third challenge is for greater flexibility in the labour market and better worker protection ahead of the fourth industrial revolution, where technologies will blur the lines between the digital, physical and biological. Industries will need to be able to reallocate workers between tasks and jobs as they change, the report says.
The dominance of European countries at the top of the index is little changed from last year, with Switzerland holding first place at 5.86 out of a possible 7, having scored well across all areas and boosted by improvements in innovation and business sector sophistication. The Netherlands, Germany and Sweden are all credited for their capacity to innovate, which together with business sophistication prepares them for the coming technological changes. The UK, too, stays high at 5.51, with the Brexit negotiations yet to undermine its competitiveness, the report says.
Finland, which has the highest country score for institutions and health and primary education, plus a higher-education score second only to Singapore, is credited for its investment in human capital and a sophisticated innovation environment. The lower score of 5.18 for France – though still high globally – is caused by a weak economic environment and rigid labour markets, despite its strong infrastructure, global market and innovation. Russia has overtaken a few countries this year through the economy recovering from its 2015-16 recession, but still scores below 5, partly due to weaknesses related to banking, judicial independence and corruption.
North America continues to be highly competitive, with technological progress and innovation boosting local and global growth. But the report points to growth risks from concentrated industry, inequality and sustainability. The US scores high in most categories, rising from third to second position overall, with only its health and primary education scoring low amongst other top-ranking countries. In Canada, the economic ranking fell with challenges noted in education, technology, business sophistication and innovation.
In Asia Pacific, while Indonesia’s position has risen on its large market size and robust economy, Singapore is down from second to third place, with deflation affecting the economy. Excellent performance elsewhere merits its still-high position. Also noteworthy is Hong Kong, which overtook the UK and Sweden for competitiveness, boosted by better business sophistication and innovation, and a drop in inflation. China has gained in all areas bar economy and infrastructure.
Countries in the Middle East and North Africa have seen an improvement, credited in part to a shift away from reliance on oil and gas, and investment in digital and technology infrastructure, while Sub-Saharan Africa remains largely unchanged.
In Latin America, despite a reduction in poverty and a growing middle class over the last decade, corruption and lack of trust in governments continues to be a challenge. However, small improvements in competitiveness are being seen after two years of recession as the region is adjusting to the end of the commodity boom and is making progress in infrastructure, technology and education.
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