The United States has slipped
further down a global ranking of the world's most competitive economies,
according to a World Economic Forum (WEF) survey released on Wednesday.
The world's largest economy, which
was placed 5th last year, fell two positions to the 7th spot - marking its
fourth year of decline.
A lack of macroeconomic stability,
the business community’s continued mistrust of the government and concerns over
its fiscal health were some of the reasons for the downgrade, according to the
annual survey.
"A number of weaknesses are
chipping away at its competitiveness...the U.S. fiscal imbalances and continued
political deadlock over resolving these challenges," said Jennifer Blanke,
Economist at the Geneva-based WEF.
Political deadlock over reducing
the unsustainable federal government budget deficit – projected to hit $1.1
trillion this year – prompted Standard & Poor’s to downgrade the country’s
credit rating by one notch to AA+ from
AAA last August.
A mix of U.S. tax hikes and
spending cuts – referred to as the "fiscal
cliff" - are set to come into force in January unless lawmakers
reach a compromise for avoiding them.
The survey, which has been
conducted annually for over three decades, ranks the competitiveness of 144
countries based on 12 key indicators including infrastructure, macroeconomic
environment, labor market efficiency and innovation.
“If you look at competitiveness,
what we are talking about is productivity. It’s countries that are productive
that can support the sorts of rising living standards and high wages that
everyone is looking for,” Blanke told CNBC.
Despite declining in the overall
ranking, the forum highlighted that the U.S. remains one of the world’s top
innovators – supported by an “excellent” university system - and continues to
offer vast opportunities because of the sheer size of its domestic economy.
Switzerland and Singapore retained
their positions as the most competitive economies, coming in 1st and 2nd,
respectively.
The Global Competitiveness Index 2012–2013
|
Country | 2012-2013 | 2011-2012 |
Switzerland | 1 | 1 |
Singapore | 2 | 2 |
Finland | 3 | 4 |
Sweden | 4 | 3 |
Netherlands | 5 | 7 |
Germany | 6 | 6 |
United States | 7 | 5 |
United Kingdom | 8 | 10 |
Hong Kong | 9 | 11 |
Japan | 10 | 9 |
Source: World Economic
Forum
|
“Switzerland’s productivity is
further enhanced by a business sector that offers excellent on-the-job-training
opportunities and labor markets that balance employee protection with the
interests of employers,” the report said.
China Tops the
BRICs
Among the large emerging
economies, China was ranked highest at 26, thanks to favorable macroeconomic
conditions. This was significantly higher than Brazil, India and Russia which
came in at 53, 56 and 66, respectively.
China runs a moderate budget
deficit, boasts a low government debt-to-GDP ratio of 26 percent and its gross
savings rate remains above 50 percent of GDP, the forum said. In addition, the
rating of its sovereign debt (AA-) is significantly better than that of the
other BRICs and of many advanced economies.
However, the world’s second
largest economy has slipped two notches from last year’s ranking, owing to a
deterioration in the development of its financial markets and technological
readiness.
“Insufficient domestic and foreign
competition is of particular concern, as the various barriers to entry appear to
be more prevalent and more important than in previous years,” WEF report said.
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