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eport 2014-2015 released yesterday by the World Economic Forum, as experts warned the health of the global economy is at risk despite years of bold monetary policy, as countries struggle to implement structural reforms necessary to help economies grow.
In its annual assessment of the factors driving countries’ productivity and prosperity, the report identifies uneven implementation of structural reforms across different regions and levels of development as the biggest challenge to sustaining global growth.
It also highlights talent and innovation as two areas where leaders in the public and private sectors need to collaborate more effectively in order to achieve sustainable and inclusive economic development.
Sri Lanka, which climbed three spots to 65 last year from 68 in 2012, struggled to make headway despite its overall score remaining at 4.2 (from a range of 1 to 7) from the previous index. The country’s best rank remains 52 that was achieved in 2011, gained in the upswing experienced after the end of the war.
Access to financing, inefficient Government bureaucracy and tax regulations were emphasized as the three top problematic factors for doing business by the report. Efficiency of institutions also slipped from 54 in 2013 to 62 in the latest report with even infrastructure dropping two ranks from 73 to 75.
However, macroeconomic environment improved from 120 in 2013 to 114, labour market efficiency remained the same at 135 and market size also remaining stagnant at 61.
According to the report’s Global Competitiveness Index (GCI), the United States improved its competitiveness position for the second consec
utive year, climbing two places to third on the back of gains to its institutional framework and innovation scores.
Elsewhere in the top five, Switzerland tops the ranking for the sixth consecutive year, Singapore remains second and Finland (4th) and Germany (5th) both drop one place. They are followed by Japan (6th), which climbs three places and Hong Kong SAR (7th), which remains stable. Europe’s open, service-based economies follow, with the Netherlands (8th) also stable and the United Kingdom (9th) going up one place. Sweden (10th) rounds up the top-10 of the most competitive economies in the world.
“The leading economies in the index all possess a track record in developing, accessing and utilising available talent, as well as in making investments that boost innovation. These smart and targeted investments have been possible thanks to a coordinated approach based on strong collaboration between the public and private sectors,” the report noted.
Some of the world’s largest emerging market economies continue to face difficulties in improving competitiveness. Saudi Arabia (24th), Turkey (45th), South Africa (56th), Brazil (57th), Mexico (61st), India (71st) and Nigeria (127th) all fall in the rankings. China (28th), on the contrary, goes up one position and remains the highest ranked BRICS economy.
In Asia, the competitiveness landscape remains starkly contrasted. The competitiveness dynamics in South-East Asia are remarkable. Behind Singapore (2nd), the region’s five largest countries (ASEAN-5) – Malaysia (20th), Thailand (31st), Indonesia (34th), the Philippines (52th) and Vietnam (68th) – all progress in the rankings. Indeed, the Philippines is the most improved country overall since 2010. By comparison, South Asian nations lag behind, with only India featuring in the top half of the rankings.
“The strained global geopolitical situation, the rise of income inequality, and the potential tightening of the financial conditions could put the still tentative recovery at risk and call for structural reforms to ensure more sustainable and inclusive growth,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.
Xavier Sala-i-Martin, Professor of Economics at Columbia University in the US, added: “Recently we have seen an end to the decoupling between emerging economies and developed countries that characterised the years following the global downturn. Now we see a new kind of decoupling, between high and low growth economies within both emerging and developed worlds. Here, the distinguishing feature for economies that are able to grow rapidly is their ability to attain competitiveness through structural reform.”
