U.S. ranks first among world’s most competitive economies
Arturo Bris, Professor of Dinance, IMD Business School
The US has leapfrogged Singapore and Hong Kong
to top IMD’s latest World Competitiveness Rankings.
The top five most competitive economies in the world
remain the same since 2016, but their order has
changed. With the US at the top, Hong Kong has
dropped one spot to second and Singapore remains
third. Germany has fallen two spots to 15th and the
UK has slipped one position to 20th.
IMD compiles the rankings using 258 indicators. Hard
data such as national employment and trade statistics
are weighted twice as much as the soft data from a
survey of business executive opinions, which
measures the business perception of issues like
corruption, environmental concerns and quality of life.
The return of the US to the top is driven by its
strength in economic performance and infrastructure.
Many will wonder if Trump is responsible for this
return to the top spot in the rankings. The answer is a
mixed bag. Hard data still reflects the results of
policies from the Obama administration which
boosted employment and output, like the American
Recovery and Reinvestment Act of 2009. Meanwhile,
the survey of business executives element of the
rankings indicates that the Trump administration is
perceived as business friendly.
But in the category of how attractive the country
remains to business executives, the US ranked very
low in perceptions of government competency and the
risk of political instability. The country also ranked
number one in the rankings in 2013-15, which shows
that any recent policy decisions have not miraculously
catapulted the country to the top.
Hong Kong comes in at second but with different
strengths to the US. It scored especially high in terms
of government efficiency and business efficiency. This
reflects the fact that there is no template to becoming
the most competitive country in the world; each has
its unique strengths and weaknesses. Countries at
the top of the rankings share an above the average
performance across all competitiveness factors, but
their competitiveness mix varies.
The Netherlands moves one place to fourth, swapping
with Switzerland which moves down to fifth. The
Netherlands’ advancement shows a “balanced” path
to competitiveness, ranking in the top ten in economic
performance, government and business efficiency.
Switzerland’s drop is mainly due to a slowdown in
exports and, to a lesser extent, an increase in
perceptions about threats of relocation of its R&D
The UK slipping
The UK has steadily slid from 16th in 2014 to 20th in
2018. The criteria it declined the most in since last
year are consumer price inflation, exchange rate
stability and risk of political instability, thanks in large
part to Brexit. It has made gains, however, in stock
market capitalization and exchange rate stability.
Germany has also dropped at a steady rate from sixth
in 2014 to 15th this year, also showing declines in
price inflation as well as exchange rates and in the
population growth category. It has improved in GDP
growth per capita and real GDP growth.
The remaining places in the top ten are occupied
largely by Nordic countries: Denmark (sixth), Norway
(eighth) and Sweden (ninth). These countries show
strong performance in the overall productivity of the
private sector and management practices.
Other high performing economies advanced even
further this year. Notably, Austria (18th) and China
(13th) considerably improve their positions by seven
and five places respectively. Economic growth,
reduction of government debt and increased business
productivity enable Austria to move up. In the case of
China, investment in infrastructure, as well as
improvement in some institutional aspects such as the
legal and regulatory framework have boosted its
The bottom five economies in the 63 countries that
were ranked show a slight change in their
performance, especially among those countries that
have experienced economic and political distress in
the last few years. While Mongolia (62nd) and
Venezuela (63rd) remain at the bottom of the table,
Ukraine (59th) and Brazil (60th) have made small
improvements. Brazil’s is the first since 2010 due to a
positive shift in its real GDP and employment. Ukraine
increases because of its business efficiency. Their
rise pushes Croatia down two places to 61st.
Aside from Croatia, Eastern Europe shows mixed
results, but the majority of the region’s economies
have improved. Very few Western European
economies advanced in the rankings this year. In the
Middle East, despite the increase of political tensions
in the area, all the countries experience
competitiveness improvements with the exception of
Saudi Arabia which drops three places to 39th. Most
Latin American countries in the sample improved.
The IMD World Competitiveness Center has
published rankings every year since 1989. Every year
the study shows that there is no one-size-fits-all
approach to having a competitive economy. There are
a number of factors involved and if an economy can
raise its game in a good number of them – whether
the focus is hard economic data or government
efficiency, it can rise through the ranks.
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Arturo Bris does not work for, consult, own shares in or receive
funding from any company or organization that would benefit from
this article, and has disclosed no relevant affiliations beyond their
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