Singapore knocks US off top spot as the world’s ‘most competitive economy’
Which nation hosts the world’s most competitive economy? When it comes to economic stability, infrastructure and innovation, the outright winner is…Singapore, according to the World Economic Forum (WEF).
The Asian city-state came top of the WEF’s annual Global Competitiveness Report, which was released in October. The US, which was ranked highest last year, was pushed down into second place, while Hong Kong came third. As a result, the East Asia and Pacific region is now the most competitive in the world, the report concluded.
Singapore is the “most open economy in the world”, according to the WEF, with high quality infrastructure, macroeconomic stability, and high scores for health, labour market and financial systems, among other areas. Even so, there are still areas for improvement. For example, Singapore ranks 124th on the Freedom of the Press Index.
It added: “Going forward, in order to become a global innovation hub, Singapore will need to promote entrepreneurship and further improve its skills base, albeit from a relatively high base.”
For its part Hong Kong ranked first in four areas - macroeconomic stability, health, financial system and product market - the most of any economy. It also scored well in terms of infrastructure and adoption of technology but Hong Kong’s “biggest weakness is undoubtedly its limited capability to innovate,” leaving it in third place overall, the analysis said.
Commenting on the WEF’s findings, Aidan Yao, Senior Economist, China, at AXA Investment Managers, said: “Both Singapore and Hong Kong have experienced tremendous growth in their economies and societies in recent decades, and developed into international financial, trading and logistic hubs that are now the most competitive in the world.
“Besides Singapore and Hong Kong, many other Asian countries – China and the Association of Southeast Asian Nations – have also seen constantly improving competitiveness over the years, particularly in the area of economic stability, infrastructure, innovation and health improvement. With Asia’s GDP due to surpass that of the rest of the world, the Asian century is about the begin and global investors need to get ready.”
Japan, in sixth place in the WEF’s competitiveness index, scored highly in terms of infrastructure, macroeconomic stability and health, and is one of the most technology-savvy nations in the world, according to the report. However, the WEF highlighted that the country’s overall competitiveness is undermined to some extent by “inadequate teaching methods” fuelling a skills gap, inequality in the labour market and a “rigid corporate culture”.
China was ranked 28th, with the report noting its strengths included the size of its market and macroeconomic stability. Adoption of technology, health and infrastructure also helped boost the country’s score. However, the WEF said that China’s innovation capability would “benefit from a more efficient, more open and fairer domestic market that would allow for more intense competition and better allocation of resources.” Furthermore, the labour market is marred by insufficient protection for workers’ rights, low participation of women and a lack of internal mobility, among other things.
Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, said in a preface to the report: “As monetary policies begin to run out of steam, it is crucial for economies to rely on fiscal policy, structural reforms and public incentives to allocate more resources towards the full range of factors of productivity to fully leverage the new opportunities provided by the Fourth Industrial Revolution.”
He added: “It has become imperative for all economies to develop new inclusive and sustainable pathways to economic growth if we are to meet the [United Nations] Sustainable Development Goals.”
Source: World Economic Forum’s annual Global Competitiveness Report, October 2019