• Switzerland remains among the best performers in the Global Competitiveness Index, at second position overall.

GCR Country Profile Highlights 2007/2008

• The United States is assessed this year as the world’s most competitive economy. The country is endowed with a winning combination of highly sophisticated and innovative companies operating in very efficient factor markets. This is buttressed by an excellent university system and strong collaboration between the educational and business sectors in research and development. These characteristics, combined with the scale opportunities afforded by the sheer size of its domestic economy, come together to make the United States arguably the country with the most productive and innovative potential in the world. However, a number of weaknesses in more basic areas, particularly related to macroeconomic imbalances and some aspects of the institutional environment, continue to pose a risk to the country’s overall competitiveness potential. These areas require attention from the government to ensure that the country maintains its competitive edge in the future.

• Switzerland remains among the best performers in the Global Competitiveness Index, at second position overall. The country is characterized by an excellent capacity for innovation and a very sophisticated business culture, ranked first overall in this area. Similar to the United States, Switzerland is endowed with top-notch scientific research institutions and high spending on research and development  particularly impressive given the country’s small size. Strong collaboration between the academic and business sectors ensures that much of its basic research is translated into useful products and processes on the market, buttressed by strong intellectual property protection. Innovation is reflected in the high rate of patenting in the country, for which Switzerland ranks sixth worldwide on a per capita basis.

• The Nordic countries continue to hold privileged positions in the rankings. Denmark ranks third, with Sweden and Finland following closely at fourth and sixth places, respectively. In a number of areas the Nordics outperform the United States and Switzerland. For example, they receive among the best marks worldwide for their macroeconomic environments, as they have been running budget surpluses and have very low levels of public indebtedness. Finland and Denmark have the most efficient institutions in the world (ranked first and second, respectively), followed very closely by Sweden, ranked sixth in this area. Finland, Denmark and Sweden also occupy the top three positions in the higher education and training pillar, with Finland ranked first in this indicator for several years in a row.

• Germany and the United Kingdom retain their places among the most competitive economies in the world, ranked fifth and ninth, respectively. Both countries receive excellent scores for the quality of their infrastructure (particularly Germany, ranked number one). In the context of the large market size available to both countries, another common strength is the efficiency of their goods and financial markets, with the United Kingdom receiving a particularly outstanding evaluation in the latter (second). On the other hand, the United Kingdom’s flexible labour market (10th) stands in contrast to Germany’s (115th) where the determination of wages and the cost of firing have strongly hindered job creation. Both countries are also well assessed in the more complex innovation and business sophistication indicators, with Germany in particular ranking first out of 131 economies in the sophistication of its business sector.

• France ranks 18th in this year’s Global Competitiveness Index. The country’s status among the top 20 most competitive economies in the world rests on a number of features that contribute to its excellent business environment. The country’s infrastructure is among the best in the world (ranked second), with outstanding transport links, energy infrastructure and communications. The high degree of sophistication of its business culture (10th in the business sophistication pillar) and its leadership in the area of technological innovation (17th in the innovation pillar) are important attributes that have helped boost the France’s growth potential. On the other hand, a number of weaknesses are hindering the country from unleashing all of its competitive potential. France’s labour market ranks a low 129th  third to last out of all countries  for its lack of flexibility, and 114th for red tape. Another area of concern is the macroeconomic environment, with the government budget deficit and the related public sector debt ratio still remaining high.

• Estonia (ranked 27th) continues to be, by a significant margin, the most competitive economy among the 12 countries that joined the European Union (EU) in 2004. The efficiency of Estonia’s government institutions (22nd), the excellent management of public finances and its aggressiveness in adopting new technologies (19th) outshine the performance of many of the “old-time” members of the EU. This is in contrast to Poland (ranked 51st) with poor marks for its institutional environment and low public trust in politicians, against the backdrop of weak and deteriorating public finances.

• Italy ranks 46th with strengths in some areas balanced by weaknesses in others. Italy is relatively well assessed in more complex areas measured by the Global Competitiveness Index, particularly the sophistication of the businesses environment. However, the country’s overall competitiveness performance is held back by some structural weaknesses in the economy. Among the most problematic areas are weak public finances and extremely high levels of public indebtedness (ranked 118th in this indicator), the inefficient use of public resources, a weak institutional environment (ranked 71st), with low levels of accountability and transparency, and a perceived lack of independence within the judicial system, all of which increase business costs and undermine investor confidence. Source WEF