Since 1989, the IMD World Competitiveness Center has published the 2023 IMD World Competitiveness Yearbook. The Center has a network of partners in 56 countries in order to publish the Yearbook, which ranks the competitiveness of nations throughout the world. The Yearbook is based on benchmarking, trends, surveys, and statistics. According to the Yearbook, “These factors measure how countries manage their competencies to achieve long-term value creation.” The Yearbook clearly shows that a country’s competitiveness capability is not based solely on GDP. The competitiveness ranking is based on 336 competitiveness criteria based on economic literature, international, national, and regional sources, and direct input from the business community, public sectors sources, and research academies.
According to the Yearbook, the top three competitive countries out of 64 countries analyzed were all in Europe: Denmark, Ireland, and Switzerland. Denmark tops the list for the second year in a row. Ireland jumped from eleventh position last year to second place. Switzerland, previously first place in 2021, dropped to second place in 2022 and fell one spot to third place. The top Asian nation ranked for its competitiveness was Singapore in fourth place. The Yearbook states that “all three are small economies that make good use of their access to markets and trading partners.” Rounding up the top ten were the Netherlands (fifth), Taiwan (sixth), China (seventh), Hong Kong SAR (eighth), the U.S. (ninth), and United Arab Emirates (tenth). The U.S. moved up one spot on the list from tenth in 2022.
There are several interesting observations that the Yearbook points out. Denmark is number one on the list because of continuous achievements across all of the competitiveness factors that were measured. It is first in business efficiency, second in infrastructure, and is strong in government efficiency. Ireland is second on the list because of its strong showing in economic performance, in which it rose from seventh in this category to first in 2023. Switzerland is first for government performance and infrastructure, and strong in business efficiency.
The Yearbook makes the interesting observation that countries such as Thailand, Malaysia, and Indonesia, that were later opening up their economies after the COVID-19 pandemic are starting to see improvements in their competitiveness. Countries such as Sweden and Finland that were much quicker to open up their economies have witnessed a decline in their competitiveness.
As has been a trend for the past few years, Europe ranks high in competitiveness, with five of its nations in the top ten list. The Yearbook states that “The most competitive economies also tend to have strong and efficient institutions. A country’s ability to generate prosperity for its people is a key determiner of success.” It makes the bold statement that to date, China and even the U.S. have not been able to do this.
From a global standpoint, the Yearbook states that the U.S.-China trade war, which began in 2018, has marked an early sign of the reappearance of geopolitical risk. The tariffs, which have resulted from this trade war, have increased import costs, and have created uncertainty for private sector companies. Russia’s 2022 invasion of Ukraine have added to the geopolitical risk. This war has had a disrupting effect on the movement and prices of agricultural products and energy. Both Ukraine and Russia are major producers of these products.
As pertains to the U.S., the Yearbook states that it continues to perform strongly in international investment (first), finance (first), and in the domestic economy (fifth). It is third in access to financial services-gender ratio, 22nd in exports of goods-growth, 20th in terms of trade index, and 20th in terms of direct investment stocks inward as a percentage of DGP. However, it does point out that the U.S. ranks low in factors such as attitudes and values (30th down from 26th) and societal framework (down to 41st from 40th).
Where the Yearbook is particularly critical of the U.S., and what is hampering its competitiveness, is in the category of government efficiency in which it ranks 27th. Gridlock in Washington, D.C., and the threat of a government shutdown drag the U.S. down in this category. The deep rifts between the Democrats and Republicans and their unwillingness to work together to address the nation’s needs make the U.S. a less competitive nation.
The Yearbook is important to gauge in what areas a country needs improvement to compete in the global market. Countries fight for talent, and talent gravitates to where it can be most effective. Companies locate where they can be competitive and secure. This is much more possible in nations that facilitate trade, strive for government efficiency, and have secure financial and business markets.