GENEVA – The U.S. was ranked the world’s most competitive economy in 2018, as a result of its business dynamism, efficient financial system, labor market and strength in innovation, a business survey by the World Economic Forum said.
The report placed Singapore second and Germany third, while China was ranked 28th, under a new methodology to fully capture the dynamics of the global economy in the fourth Industrial Revolution such as idea generation, entrepreneurial culture, openness and agility.
But the study — based on a survey of 12,274 top global business executives in 140 economies and 12 determinants of competitiveness, which include markets, innovation and the macro-economy — also concludes that globalization, a key driver of growth for the past 30 years, “is facing a popular and political backlash.”
Klaus Schwab, founder and executive chairman of the World Economic Forum, critically observed: “Growing inequality and geopolitical flash points have fueled citizens’ concerns about globalization and polarized the political debate.”
The WEF report also warns that recent tariff hikes by the U.S. and retaliatory measures by trading partners (such as China) have “increased the risk” of a trade war.
However, the global economy, the report argues, would be “positively impacted” by a return to greater openness and integration, and argues economies with low tariffs and low non-tariff barriers, also tend to perform well.
On the competitiveness situation in major apparel-exporting countries, it notes that growth in China is now driven less by investment and exports and more by consumption and services and points out the country is increasingly focused on innovation. But it also suggests Chinese policymakers should offer “a more level playing field for companies by promoting domestic and foreign competition.”
India, spurred by an acceleration in innovation, the report said, climbed up five slots to 58th but also adds the country “would benefit from increased trade openness to drive productivity growth.”
Turkey, “grappling with near double-digit inflation and negative debt dynamics,” dropped three places to 61st, and Vietnam fell three rankings to 77th.
Bangladesh, Cambodia and Pakistan also dropped one slot each to 103rd, 107th and 110th, respectively, it said.