A decade 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 World Economic Forum says.
The WEF’s latest Global Competitiveness Report 2019 showed that Singapore has overtaken the United States to become the most competitive nation in the world.
Covering 141 economies, the index measures national competitiveness—defined as the set of institutions, policies and factors that determine the level of productivity and long-term economic growth.
The report measures the strength of 103 key indicators, such as inflation, digital skills and trade tariffs, arranged into 12 pillars.
Each indicator, or ‘pillar’ uses a scale from 0 to 100, to show how close an economy is to the ideal state or ‘frontier’ of competitiveness in that area.
With a score of 84.8, Singapore is the world’s most competitive economy in 2019, overtaking the US, which falls to second place. Hong Kong SAR, Netherlands and Switzerland round up the top five.
“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, globalisation, technology, and elites,” the WEF warned.
“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,” it said.
Led by Mauritius (52nd), sub-Saharan Africa is overall the least competitive region, with 25 of the 34 economies assessed this year scoring below 50.
South Africa, the second most competitive in the region, improves to the 60th position, while Namibia (94th), Rwanda (100th), Uganda (115th) and Guinea (122nd) all improve significantly, the WEF showed.
Among the other large economies in the region, Kenya (95th) and Nigeria (116th) also improve their performances, but lose some positions, overcome by faster climbers, the report said.
South Africa’s competitiveness has regained momentum after the recent political landscape shift and climbed seven places in 2019.
The country is a regional financial hub (83.2, 19th), with well-developed equity, insurance and credit markets, all achieving a score of 100, the report said.
It has also developed one of the most advanced transport infrastructures in the region (45th) and is among the top countries in Africa for marketsize (35th).
Beyond these established strengths, health conditions—though starting from a low base (118th)—are better, adding 3.3 years to the average healthy life expectancy since the last assessment.
Institutional quality has also improved (55th) but unevenly, the report said.
Some aspects of this category have achieved ‘remarkable progress’, including restored balance of powers across different state’s entities (16th), enhanced administrative efficiency of the public sector (39th) and corporate governance (26th).
Other aspects however, continue to perform poorly: security (135th) remains one of the main restraints to South Africa’s competitiveness, while transparency (62nd) and government adaptability to change (100th) are also below par, the report said.
“Further, South Africa’s competitiveness is being held back by relatively low business dynamism (60th), which is inhibited by insolvency regulation and administrative burdens to start a business, and a persistently insufficient labour market flexibility (111th),” the WEF said.
The report showed that flexibility of wage determination is limited (134th) and hiring foreign labour is difficult (123rd).
“South Africa’s sensitivity to exports of mineral resources is likely to hit the country’s economic outlook and will make reducing unemployment (projected above 27%) challenging.
“Against this backdrop, structural reforms are needed tore-ignite the economy and offer better opportunities to a larger share of South African citizens.”