SINGAPORE has once again come up tops as the most competitive among 63 global economies.
According to the 2020 Institute for Management Development (IMD) World Competitiveness Ranking, Singapore’s win came on the back of its strong economic performance. This in turn stems from the country’s robust international trade and investment, employment, and labour market measures.
Stable performances in both its education system and technological infrastructure – comprising telecommunications, Internet bandwidth speed, and high-tech exports – also played key roles, IMD said.
Making up the top five after Singapore are, in order, Denmark, Switzerland, the Netherlands, and Hong Kong.
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“As a group, they illustrate the current strength of many small economies,” IMD said.
Arturo Bris, director of the IMD World Competitiveness Center and professor of finance, said: “The benefit of small economies in the current crisis comes from their ability to fight a pandemic and from their economic competitiveness. In part, these may be fed by the fact it is easy to find social consensus.”
That said, José Caballero, senior economist at the IMD World Competitiveness Center, told The Business Times (BT) that a recession could have a negative impact on the future competitiveness of Singapore.
He said a recession would negatively affect the resilience of the Republic’s economy and increase economic uncertainty. This would, in turn, affect investment levels. “Furthermore, it can limit the recruitment of foreign highly skilled staff by reducing employment opportunities and also remuneration levels, both key aspects of Singapore’s success in the competitiveness rankings,” said Mr Caballero.
Thus far, Singapore has also been a beneficiary of intensifying trade tensions between the US and China. The US economy, which was toppled from its No 1 spot in IMD’s ranking by Singapore last year, tumbled seven spots this year to come in 10th.
“Trade wars have damaged both China and the US economies, reversing their positive growth trajectories,” IMD said. China dropped to the 20th position from 14th in 2019.
With the exception of Singapore and Taiwan, which jumped from 16th place to 11th, all other Asian economies fell in their rankings. IMD pointed out that the Asean economies are hugely dependent on China due to a generally high level of dependency on trade. “Therefore, whatever negative repercussions felt in China economically are also felt by countries in Asean,” IMD said.
Nevertheless, Mr Caballero told BT that if US-China trade tensions continue, Singapore is likely to experience some deterioration in its overall economic performance in the long term, particularly in the areas of international trade and investment. Such deterioration may in turn negatively affect employment, public finances, overall productivity, and access to skilled overseas labour, he said.
In the face of a potential decline in globalisation, Mr Caballero said business competitiveness will be fundamental for the resilience of economies. He said: “Our research shows that competitive firms display three key characteristics: significantly better governance, a strong focus on talent development, and high levels of innovation. In engaging in these aspects, competitive businesses will highly contribute to the health of the economy.”
The IMD World Competitiveness Ranking has been produced every year since 1989. The ranking results are the combination of both hard data as well as responses from business executives on how they perceive their country’s economy.
Among other things, economies are ranked on economic performance, government efficiency, business efficiency, and infrastructure.