Switzerland has retained its crown as the world’s most competitive economy for the sixth year in a row, according to a ranking by a leading think-tank.
Western economies continue to dominate the annual list of the most competitive economies drafted by the World Economic Forum, with six European countries ranked inside the top 10.
But rankings within the eurozone remain very uneven, with the WEF arguing that “while the divide between a highly competitive north and a lagging south and east persists, a new outlook on the European competitiveness divide between countries implementing reforms and those that are not can now also be observed.”
The WEF defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country” and the rankings are based on a variety of factors such as higher education, infrastructure and innovation.
Portugal jumps up 15 places in the rankings to 36th, with the WEF arguing that the “ambitious reform program the country has adopted seems to have started paying off . . . most notably in areas related to the functioning of the goods market.” By contrast, France and Italy barely move in the rankings, at 23rd and 49th respectively, and face criticism for “not having fully engaged” in reform.
The UK has moved up one place to ninth, thanks to its deficit-reduction programme and labour market improvements, but the WEF warns that access to loans – where the UK is ranked 82nd out of 144 economies – is the “most problematic factor for doing business in the country. “
Lending to non-financial businesses in the UK has decreased sharply since the financial crisis, with small- and medium-sized businesses particularly hard hit despite a succession of policies to encourage banks to lend more.
George Osborne, UK chancellor, said the WEF report was further evidence that the government’s policies were delivering a more competitive economy, adding “the direct link the WEF draw been our credible fiscal policy and our country’s ability to attract business and create jobs is compelling.”
Klaus Schwab, founder and executive chairman of the WEF, said policy makers should not take for granted the health of the global economic recovery.
“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,” he said.
Many of the world’s largest emerging market countries, including South Africa, Brazil, India and Mexico, fell in the rankings. China, despite being set to overtake the US this year as the world’s largest economy, only makes the list in 28th place. The WEF criticised its technological readiness and the relative fragility of its banking industry.