- Bilateral cooperation
- Press center
- Consular issues
- Defense Attache
Ten years on from the global financial crisis, the world economy remains locked in a cycle of low or flat productivity growth despite the injection of more than $10 trillion by central banks. The latest Global Competitiveness Report paints a gloomy picture, yet it also shows that those countries with a holistic approach to socio-economic challenges, look set to get ahead in the race to the frontier.
Long-term growth: the final frontier
This year’s Global Competitiveness Report is the latest edition of the series launched in 1979 that provides an annual assessment of the drivers of productivity and long-term economic growth. With a score of 84.8 (+1.3), Singapore is the world’s most competitive economy in 2019, overtaking the United States, which falls to second place. Hong Kong SAR (3rd), Netherlands (4th) and Switzerland (5th) round up the top five.
Building on four decades of experience in benchmarking competitiveness, the index maps the competitiveness landscape of 141 economies through 103 indicators organized into 12 themes. Each indicator, using a scale from 0 to 100, shows how close an economy is to the ideal state or “frontier” of competitiveness. The pillars, which cover broad socio-economic elements are: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, the financial system, market size, business dynamism and innovation capability.
A lost decade
Economic tipping point and a widening competitiveness gap
The world is at a social, environmental and economic tipping point. Subdued growth, rising inequalities and accelerating climate change provide the context for a backlash against capitalism, globalization, technology, and elites. There is gridlock in the international governance system and escalating trade and geopolitical tensions are fuelling uncertainty. This holds back investment and increases the risk of supply shocks: disruptions to global supply chains, sudden price spikes or interruptions in the availability of key resources.
The Global Competitiveness Report 2019 reveals an average across the 141 economies covered of 61 points. This is almost 40 points short of the “frontier”. It is a global competitiveness gap that is particularly concerning, given the world economy faces the prospect of a downturn. The report’s survey of 13,000 business executives highlights deep uncertainty and lower confidence.
While the $10 trillion injection by central banks is unprecedented and has succeeded in averting a deeper recession, it is not enough to catalyse the allocation of resources towards productivity enhancing investments in the private and public sectors.
However, some of this year’s better performers appear to be benefiting from global trade tensions through trade diversion, including Singapore (1st) and Viet Nam (67th), the most improved country in 2019.
The principal culprits
Persistent weaknesses in the drivers of productivity growth are among the principal culprits. In advanced, emerging and developing economies, productivity growth started slowing in 2000 and decelerated further after the crisis. Between 2011 and 2016, “total factor productivity growth” – or the combined growth of inputs, like resources and labour, and outputs – grew by 0.3% in advanced economies and 1.3% in emerging and developing economies.
The financial crisis added to this deceleration through “productivity hysteresis”– the long-lasting delayed effects of investments being undermined by uncertainty, low demand and tighter credit conditions. Beyond strengthening financial system regulations, many of the structural reforms designed to revive productivity that were promised by policy-makers in the midst of the crisis did not materialize.
The injection of cash by the world’s four major central banks may have even contributed to divert more capital towards the financial market rather than to productivity-enhancing investments.