Wednesday May 2nd 2017
By: David McDonald
The global economy is constantly changing. Perhaps the biggest surprise is the development of many Asian countries such as China and India. A focus on the manufacturing and service industries have respectively boosted China and Asia’s middle class by an impressive amount.
Despite Asia’s economic rise, the region is still far away from being considered among the most economically stable – that position belongs to the West.
The US News Organization compiles a list of the most stable and business-friendly economies in the world every year.
This year, Switzerland topped the list, with Canada in a close second and then the UK.
Taken from the US news website:
“Each country was scored on each of the 65 country attributes based on a collection of individual survey responses. The more a country was perceived to exemplify a certain characteristic in relation to the average, the higher that country’s attribute score and vice versa. These scores were normalized to account for outliers and transformed into a scale that could be compared across the board.
Attributes were grouped into nine subrankings that rolled into the Best Countries ranking: Adventure, Citizenship, Cultural Influence, Entrepreneurship, Heritage, Movers, Open for Business, Power and Quality of Life.
These thematic subrankings were formed by grouping country attributes that had similar global trends in survey responses. Subranking scores for each country were determined by averaging the scores that country received in each of the attributes comprising that subranking.“
It’s important to note that there are hundreds of different comparisons made on factors aiming to determine living standards, climate, infrastructure, political sustainability, and economic stability. So it’s best not to take any singular ranking too serious, but rather, to look at several analyses to see any re-occurring countries.
The IMF is another great source for comparing global economies.
This image, acquired from CNN Money depicts the world’s fastest growing economies by percentage change. It’s interesting to see that although some of these country’s like Mexico and India would not normally be topping any lists of ‘most stable economies’ but are nonetheless, expanding at an unprecedented rate.
The WEF’s Global Competitiveness Report defines competitiveness as the “set of institutions, policies, and factors that determine the level of productivity of a country.” In order to assess competitiveness, the WEF divided the 144 nations it surveyed into one of three classifications, depending on their stage of development.
According to the WEF’s report, “Factor-driven” economies are the least developed, typically relying on low-skilled labor and natural resources. More developed countries are considered “efficiency-driven” economies because they focus on improving economic output by increasing production efficiency. The most developed economies, which rely on innovation and technological changes to drive growth, are considered “innovation-driven” economies. Nations may also fall between these classifications.
A country’s competitiveness and economic development is highly correlated with its Gross Domestic Product. All of the 10 most competitive countries had among the 25 highest GDPs per capita last year. Norway, Singapore, and Hong Kong SAR are all among the five highest in terms of GDP per capita.
The least competitive countries, on the other hand, were unable to generate world-leading economic output. Three countries — Mauritania, Burundi, and Sierra Leone — had a GDP per capita of less than $10,000.
These are the best economies in the world according to a World Economic Forumreport:
1. Switzerland
> GCI score (1-7): 5.704
> GDP per capita: $47,303.25 (7th highest)
> Debt as a pct. of GDP: 49.4% (60th highest)
> Pct. of residents using Internet: 86.7% (11th highest)
> Biggest problem in doing business: Inadequately educated workforce
For the sixth year in a row, Switzerland was rated the world’s most competitive economy. Switzerland performs consistently well across all competitiveness factors and ranks first in many. Switzerland’s labor market is extremely strong and productive, ranked first in the world. While the country ranked first in its ability to attract an extremely high level of talent, efficient hiring and firing practices likely help the small nation compete on a global scale. A well-trained labor force, coupled with a high level of innovation, help make Switzerland’s business sector among the world’s most sophisticated. Unlike other global economies on the list, Switzerland also maintains one of the most stable macroeconomic environments. Yet the country might not have enough qualified workers to meet its continuing growth and global competitive needs.
2. Singapore
> GCI score (1-7): 5.645
> GDP per capita: $64,628.48 (3rd highest)
> Debt as a pct. of GDP: 103.8% (11th highest)
> Pct. of residents using Internet: 73.0% (33rd highest)
> Biggest problem in doing business: Restrictive labor regulations
In addition to boasting one of the world’s lowest unemployment rates, the small island of Singapore is projected to have one of the highest GDP’s per capita in the world in 2014. Perhaps its economic success stems from its ability to consistently provide essential economic requirements. Singapore has the strongest overall environment for institutions, infrastructure, macroeconomics, health, and education of any other country reviewed. Notably, Singapore scored highly for its transportation infrastructure — an important feature for any country relying so heavily on exports, which made up more than 178% of GDP. With a heavy reliance on exports, it’s no surprise that local supplier interaction is very limited, ranked 85th. Additionally, only 79% of women are included in Singapore’s workforce, a lower percentage of women than in 75 other countries.
3. United States
> GCI score (1-7): 5.544
> GDP per capita: $54,609.47 (6th highest)
> Debt as a pct. of GDP: 104.5% (10th highest)
> Pct. of residents using Internet: 84.2% (16th highest)
> Biggest problem in doing business: Tax rates
The United States continued to advance in competitiveness for the second year in a row, up an additional two places from last year. The greater level of competitiveness was mainly the result of improvements in core institutions and the macroeconomic environment. However, the United States still trails 32 countries in its ability to provide basic economic requirements, including infrastructure, health, and primary education.
The business community finds compliance with government regulations challenging and costs associated with crime and violence high. Yet much of the United States’ strength is in its sheer market size — it has the largest domestic market of all countries in the world. Additionally, the United States ranked fourth for its very sophisticated business environment and competitive labor market.
After looking through a few rankings by some of the credible sources mentioned above, I would have to say that Switzerland boasts the most stable economy in 2017.