Ranked: Which Economies Are the Most Competitive?

What makes a country successful from an economic perspective? Many think of this in terms of GDP per capita—but in a rapidly changing world, our definitions of progress have evolved to encompass much more.

This animated Chart of the Week visualizes 10 years of global competitiveness, according to the World Economic Forum, and tracks how rankings have changed in this time.

How Do You Measure Competition?

The WEF’s annual Global Competitiveness Report defines the concept of ‘competitiveness’ as an economy’s productivity—and the institutions, policies, and factors which shape this.

This year’s edition unpacks the national competitiveness of 141 countries, using the newly-introduced Global Competitiveness Index (GCI) 4.0 which looks at four key metrics:

1. Enabling Environment
   Includes: Institutions, Infrastructure, ICT Adoption*, Macroeconomic Activity
   *Refers to information and communications technology
2. Human Capital
   Includes: Health, Skills
3. Markets
   Includes: Product Market, Labor Market, Financial System, Market Size
4. Innovation Ecosystem
   Includes: Business Dynamics, Innovation Capability

Each country’s overall competitiveness score is an average of these 12 main pillars of productivity. With that out of the way, let’s dive into the countries which emerge triumphant.

The Most Competitive: Movers and Shakers

The world’s top countries excel in many fields—but there can only be one #1. In 2019, Singapore wins the coveted “most competitive economy” title, with a 84.8 score on the GCI.

The nation’s developed infrastructure, health, labor market, and financial system have all propelled it forward—swapping with the U.S. (83.7) for the top spot. However, more can be done, as the report notes Singapore still lacks press freedom and demonstrates a low commitment to sustainability.

How have the current scores of the most competitive economies improved or fallen behind, compared to 2018?

Rank	Economy	2019 Score	2018 Score	2018-2019 Change
#1	🇸🇬 Singapore	84.8	83.5	+1.3
#2	🇺🇸 United States	83.7	85.6	-2
#3	🇭🇰 Hong Kong	83.1	82.3	+0.9
#4	🇳🇱 Netherlands	82.4	82.4	0
#5	🇨🇭 Switzerland	82.3	82.6	-0.3
#6	🇯🇵 Japan	82.3	82.5	-0.2
#7	🇩🇪 Germany	81.8	82.8	-1
#8	🇸🇪 Sweden	81.2	81.7	-0.4
#9	🇬🇧 United Kingdom	81.2	82	-0.8
#10	🇩🇰 Denmark	81.2	80.6	+0.6

Finland (80.2) and Canada (79.6) are notable exits from this top 10 list over the years. Meanwhile, Denmark (81.2) disappeared from the rankings for five years, but managed to climb back up in 2018.

Regional Competitiveness: Highs and Lows

Another perspective on the most competitive economies is to look at how countries fare within regions, and how these regions compete among each other.

Middle East and North Africa (MENA) has the widest gap in competitiveness scores—Israel (76.7) scores over double that of poorest-performing Yemen (35.5). Interestingly, the MENA region showed the most progress, growing its median score by 2.77% between 2018-2019.

The narrowest gap is actually in South Asia, with just a single-digit difference between India (61.4) and Nepal (51.6). However, the region also grew the slowest, with only 0.08% increase in median score over a year.

Region	Best Performer	2019 Score	Worst Performer	2019 Score	Regional Gap
Europe and North America	🇺🇸 United States	83.7	🇧🇦 Bosnia & Herzegovina	54.7	29
Latin America and the Caribbean	🇨🇱 Chile	70.5	🇭🇹 Haiti	36.3	34.2
East Asia and Pacific	🇸🇬 Singapore	84.8	🇱🇦 Laos	50.1	34.7
South Asia	🇮🇳 India	61.4	🇳🇵 Nepal	51.6	9.8
Eurasia	🇷🇺 Russia	66.7	🇹🇯 Tajikistan	52.4	14.3
Middle East and North Africa	🇮🇱 Israel	76.7	🇾🇪 Yemen	35.5	41.2
Sub-Saharan Africa	🇲🇺 Mauritius	64.3	🇹🇩 Chad	35.1	29.2

Across all regions, the WEF found that East Asia’s 73.9 median score was the highest. Europe and North America were not far behind with a 70.9 median score. This is consistent with the fact that the most competitive economies have all come from these regions in the past decade.

As all these countries race towards the frontier—an ideal state where productivity growth is not constrained—the report notes that competitiveness “does not imply a zero-sum game”. Instead, any and all countries are capable of improving their productivity according to the GCI measures.



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Why It’s Time for Banks to Make Bold Late-Cycle Moves

An economic downturn is approaching on the horizon. Amid low interest rates and a manufacturing slowdown, industries and investors alike are scrambling to prepare as the window of opportunity closes.

Banking is no different. After a decade of expansion, the industry is showing many signs of a late-cycle economy. On top of this, a staggering 60% of banks are destroying value. Today’s infographic from McKinsey & Company explores the steps banks can immediately take to succeed in the next economic cycle.

How is Value Created?

In the banking sector, three main factors contribute to value creation:

• The location of the bank
• The scale of its operations
• The effectiveness of its business model

Given that geographic reach is mostly out of a bank’s control, and scale takes time to build, banks must focus on their business model.

There are three universal business model levers that all banks can immediately act on to change their destiny.

1. Risk Management
Banks can protect returns in an economic downturn by managing risk. For example, new machine-learning models can predict the riskiest customers with 35 percentage points more accuracy than traditional models.

2. Productivity
To radically reduce costs, banks can transfer non-differentiating activities to third-party “utilities”, through outsourcing, carve-outs, or partnerships. This has the potential to increase return on equity by as much as 100 basis points.

3. Revenue Growth
When customers are satisfied, they generate more value for banks—and vice versa. For instance, customers who report low satisfaction with their mortgage experience are almost seven times more likely to refinance with a different bank.

By materially improving decisive points in the customer experience, banks can increase revenue and reduce churn rates within 12-18 months.

The Four Banking Archetypes

Beyond these universal performance levers, a bank should prioritize late-cycle economic decisions based on the archetype it falls under.

• Market leaders are top-performing financial institutions in attractive markets
• Resilients are top-performing operators despite challenging market conditions
• Followers are mid-tier organizations generating returns due to favourable market conditions
• Challenged banks are poor performers in unattractive markets

Different archetypal levers are available depending on each bank’s unique circumstances.

1. Ecosystem
   Banks can find new revenue streams across and beyond banking, leveraging customer relationships and white-label partnerships.
2. Innovation
   Banks can create value by developing new methods, ideas, products and services. To implement this effectively, banks must set goals for the return on innovation as well as the timeframe.
3. Zero-based budgeting
   By justifying expenses for each new period, banks can drastically reduce costs. This involves starting from a “zero base” rather than prior years’ numbers.

Here’s how banks across the various archetypes can take action:

For example, while market leaders’ large capital base is best used for ecosystem and innovation plays, challenged banks need to radically rethink their business model or merge with similar banks.

Reinvent, Scale, or Perish

As the late-cycle economy slows even further, no banks can afford complacency. In fact, history has shown that 35% of market leaders drop to the bottom half of peers in the next cycle.

Now is the time for banks to take bold action through universal and archetypal levers—or risk being left behind.

For a more detailed breakdown of the actions that banks can take in this market environment, check out the full report by McKinsey & Company.