IMD World Competitiveness Ranking 2020: showing strength of small economies
The eagerly anticipated data on economies’ competitiveness has gone live, opening discussions on changes in the hierarchy on a national, regional and global level.
The annual rankings, now in their 32nd year, have been released unlocking a wealth of data on the performance of 63 economies across the globe.
Singapore was number one for the second year in a row. In second to fifth place, in order, came: Denmark, Switzerland, the Netherlands and Hong Kong SAR.
A marked pattern in this year’s results, which are an amalgam of hard data taken from 2019 and survey responses from early 2020, is the strength of smaller economies.
Arturo Bris, Director of the IMD World Competitiveness Center and Professor of Finance, says, “The benefit of small economies in the current crisis comes from their ability to fight a pandemic and from their economic competitiveness. In part these may be fed by the fact it is easy to find social consensus.”
The top three’s different recipes for success
Factors behind Singapore’s success are its strong economic performance which stems from robust international trade and investment, employment and labor market measures.
Stable performances in both its education system and technological infrastructure – telecommunications, internet bandwidth speed and high-tech exports – also play key roles.
Denmark, in 2nd, can credit a strong economy, labor market, and health and education systems. In addition, the country performs very well in international investment and productivity, and topped Europe in business efficiency.
Switzerland has been gradually edging towards a podium position, from 5th to 4th and now 3rd in 2020. Robust international trade fuels its strong economic performance, whilst its scientific infrastructure and health and education systems show steadfast displays.
The number of small economies – broadly defined as such by their GDP – in the top ten is striking. However, this is not to say that we are seeing a triumph of democracies. Singapore, Hong Kong and the UAE remain in the top ten, whilst some democracies (such as Argentina) sit at the bottom of the scale.
This year, new criteria were added to reflect the importance of achieving the UN Sustainable Development Goals. The criteria provide a perception of where the economy stands with respect to different sustainable goals that need to be satisfied in 10 years, such as education and the environment, inclusion and empowerment, ageing and health.
Indeed, an important component of the competitiveness study is to align the criteria employed with the important challenges and concerns of the world economy.
Setbacks for some
For the second year in a row, the USA failed to fight back having been toppled from its number one spot last year by Singapore, and coming in at 10th (3rd in 2019). Trade wars have damaged both China and the USA’s economies, reversing their positive growth trajectories. China this year dropped to 20th position from 14th last year.
While Hong Kong SAR came in at 5th, this is a far cry from 2nd which it enjoyed last year. The decline can be attributed to a decline in its economic performance, social turmoil in Hong Kong as well as the rub-on effect of the Chinese economy. However, the 2020 rankings do not pick up on events in from the last couple of months.
The UAE also falls from 5th to 9th. The Middle East struggled as a region, reflecting the oil crisis.
Shuffles upwards for economies across the globe from Canada to Norway
Norway made this year’s top ten, at 7th, having been 11th last year. This is partly due to a wider pattern in the region: all the Nordic economies experienced a noteworthy improvement in business efficiency. In fact, they all made the top ten in this measure.
The UK climbed from 23rd to 19th, whilst neighbour France (32nd) slightly lost its 2019 foothold on 31st. One interpretation is that Brexit may have created the sentiment of a business-friendly environment in the making. The UK ranked 20th on the business efficiency measure, compared to 31st least year.
Canada moved up to 8th from 13th. This rise is centered around improvements in measures related to its labor market and in the openness of its society. It led the North American sub-region.
In Latin America, a distrust of institutions may be reflected by minimal changes. Chile (38th) remains the highest-ranked country in the sub-region and Venezuela the lowest.