Competitiveness slack in big emerging economies

Among developing Asian economies, the trends are mostly positive

Access to finance remains a common threat to all economies and remains greatest impediment to unlocking investment according to The Global Competitiveness Report 2015-2016.

The report observes that a failure to embrace long-term structural reforms that boost productivity and free up entrepreneurial talent is harming the global economy’s ability to improve living standards, solve persistently high unemployment and generate adequate resilience for future economic downturns.

The report, an annual assessment of the factors driving productivity and prosperity in 140 countries finds a correlation between highly competitive countries and those that have either withstood the global economic crisis or made a swift recovery from it. The failure, particularly by emerging markets, to improve competitiveness since the recession suggests future shocks to the global economy could have deep and protracted consequences.

GCI index

The report’s Global Competitiveness Index (GCI) also finds a close link between competitiveness and an economy’s ability to nurture, attract, leverage and support talent. Among the larger emerging markets, the trend is for the most part one of decline or stagnation. However, there are bright spots: India ends five years of decline with a spectacular 16-place jump to 55th. South Africa re-enters the top 50, progressing seven places to 49th. Elsewhere, macroeconomic instability and loss of trust in public institutions drag down Turkey (51st), as well as Brazil (75th), which posts one of the largest falls. China, holding steady at 28, remains by far the most competitive of this group of economies. However, its lack of progress moving up the ranking shows the challenges it faces in transitioning its economy.

Among emerging and developing Asian economies, the competitiveness trends are mostly positive, despite the many challenges and profound intra-regional disparities. The five largest members of the Association of Southeast Asian Nations (Asean) — Malaysia (18th, up two), Thailand (32nd, down one), Indonesia (37th, down three), the Philippines (47th, up five) and Vietnam (56th, up 12) — all rank in the top half of the overall GCI rankings.

The end of the commodity super cycle has strongly affected Latin America and the Caribbean, and is already having repercussions on growth in the region. Greater resilience against future economic shocks will require further reform and investment in infrastructure, skills and innovation. Chile (35th) continues to lead the regional rankings and is closely followed by Panama (50th) and Costa Rica (52nd). Two large economies in the region, Colombia and Mexico, improve to 61st and 57th, respectively.

The report note s that the sub-Saharan Africa continues to grow close to 5 per cent, but competitiveness and productivity remain low. Overall the report observes that a failure to embrace long-term structural reforms that boost productivity and free up entrepreneurial talent is harming the global economy’s ability to improve living standards, solve persistently high unemployment and generate adequate resilience for future economic downturns.

The new normal of slow productivity growth poses a grave threat to the global economy and seriously impacts the world’s ability to tackle key challenges such as unemployment.”

Xavier Martin | Economics professor

New normal

“The new normal of slow productivity growth poses a grave threat to the global economy and seriously impacts the world’s ability to tackle key challenges such as unemployment and income inequality. The best way to address this is for leaders to prioritise reform and investment in areas such as innovation and labour markets; this will free up entrepreneurial talent and allow human capital to flourish,” said Xavier Sala-iMartin, Professor of Economics at Columbia University.