U.S. Toppled in Global Competitiveness Report

Falls from First to Sixth in Updated Index from World Economic Forum

Switzerland, Finland and Sweden are the world's most competitive economies, according to The Global Competitiveness Report 2006-2007 released Tuesday by the World Economic Forum. Denmark, Singapore, the U.S., Japan, Germany, the Netherlands and the United Kingdom complete the top 10 list, but the U.S. shows the most pronounced drop, falling from first to sixth.



"The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy," said Augusto Lopez-Claros, chief economist and director of the World Economic Forum's Global Competitiveness Network.



According to the Forum's press release, "The United States, previously in first place, continues to enjoy an excellent business environment, efficient markets and is a global center for technology development. However, its overall competitiveness is threatened by large macroeconomic imbalances, particularly rising levels of public indebtedness associated with repeated fiscal deficits. Its relative ranking remains vulnerable to a possible disorderly adjustment of such imbalances, including historically high trade deficits."



Lopez-Claros elaborated on his explanation of the U.S. decline in the rankings:

"The United States will remain, for the foreseeable future, one of the most competitive economies in the world, reflecting the existence of a long pipeline of innovation, nurtured by a first class system of higher education. However, two areas are of some concern and if unattended could allow other countries in a highly competitive global economy to challenge the US's privileged position. First, with potentially open-ended expenditure commitments linked to defense and homeland security, ongoing plans to lower taxes further, as well as other longer-term potential claims on the budget, the prospects for sustained fiscal adjustment seem not too bright. With a low savings rate, record-high current account deficits and a worsening of the US's net debtor position, there is a non-negligible risk to both the country's overall competitiveness and, given the relative size of the US economy, the future of the global economy. Second, while the US has, in general, an excellent institutional framework, the quality of the country's public institutions falls somewhat short of the levels of transparency and efficiency seen in other OECD members."

The rankings are drawn from a combination of publicly available data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the Forum. This year, more than 11,000 business leaders were polled in a record 125 economies worldwide. The survey questionnaire is designed to capture a broad range of factors affecting an economy's business climate that are critical determinants of sustained economic growth. The Forum annually delivers a comprehensive overview of the main strengths and weaknesses in a large number of countries, making it possible to identify key areas for policy formulation and reform.



The Global Competitiveness Report 2006-2007 is available at: http://www.weforum.org/en/index.htm