Insight Report Klaus Schwab, World Economic Forum The Global Competitiveness Report 2019Insight Report The Global Competitiveness Report 2019 Professor Klaus Schwab World Economic Forum EditorTERMS OF USE AND DISCLAIMER The analysis presented in the Global Competitiveness Report 2019 herein “Report” is based on a ology integrating the latest statistics from international organizations and a survey of cutives. The ology, developed in collaboration with leading experts and practitioners through a three-year consultative process, is designed to support countries to identify relevant policies and practices. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Economic Forum. The Report presents ination and data that were compiled and/or collected by the World Economic Forum all ination and data referred herein as “Data”. Data in this Report is subject to change without notice. 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The Global Competitiveness Report 2019 | iii Preface v by Klaus Schwab cutive Summary vii At a Glance The Global Competitiveness Index 4.0 2019 Rankings xiii Chapter 1 Global Findings 1 Chapter 2 Regional and Country Analysis 11 Chapter 3 Competitiveness, Equality and SustainabilityThe Way Forward 23 Economy Profiles 41 How to Read the Economy Profiles 43 Index of Economy Profiles 45 Economy Profiles 46 Appendix A Global Competitiveness Index 4.0 ology and Technical Notes 611 Appendix B The cutive Opinion Survey 633 The Voice of the Business Community Contributors and Acknowledgements 641 Partner Institutes 643 Contents The Global Competitiveness Report 2019 | v Globalization and the Fourth Industrial Revolution have created new opportunities but also disruption and polarization within and between economies and societies. In this context, the World Economic Forum introduced last year the new Global Competitiveness Index 4.0, a much-needed new economic compass, building on 40 years of experience of benchmarking the drivers of long-term competitiveness. The index is an annual yardstick for policy-makers to look beyond short-term and reactionary measures and to instead assess their progress against the full set of factors that determine productivity. These are organized into 12 pillars Institutions; Infrastructure; ICT adoption; Macroeconomic stability; Health; Skills; Product market; Labour market; Financial system; Market size; Business dynamism; and Innovation capability. The results of the GCI 4.0 in 2019 reveal that, on average, most economies continue to be far from the competitiveness “frontier”the aggregate ideal across all factors of competitiveness. Perance is also mixed across the 12 pillars of the index. The report demonstrates that 10 years on from the financial crisis, while central banks have injected nearly 10 trillion dollars into the global economy, productivity-enhancing investments such as new infrastructure, R education, skills and work; and equality and inclusion. By combining insight, models and action the Plat serves as an accelerator for emerging solutions, pilots and partnerships. We invite leaders to join us to co-shape new solutions to the challenges highlighted in this report, working together with the urgency and ambition that the current context demands of us. I want to express my gratitude to the core project team involved in the production of this report Sophie Brown, Roberto Crotti, Thierry Geiger, Guillaume Hingel, Saadia Zahidi and other colleagues from the Plat for Shaping the Future of the New Economy and Society. My deep gratitude goes to Professor Xavier Sala-i- Martin for his guidance and to the experts, practitioners and governments who were consulted. Finally, we thank the 141 Partner Institutes, which help administer the cutive Opinion Survey, whose results provide invaluable data for the GCI 4.0 and other benchmarks. The Global Competitiveness Report is designed to help policy-makers, business leaders and other stakeholders shape their economic strategies in the era of the Fourth Industrial Revolution. We hope it will also serve as a call to action to engage in the visionary and bold leadership required to build a new economic agenda for growing, sustainable and inclusive economies that provide opportunity for all. Preface KLAUS SCHWAB Founder and cutive Chairman, World Economic Forum The Global Competitiveness Report 2019 | vii A country’s perance on the overall GCI results as well as each of its components is reported as a ‘progress score’ on a 0-to-100 scale, where 100 represents the ‘frontier’, an ideal state where an issue ceases to be a constraint to productivity growth. Each country should aim to move closer to the frontier on each component of the index. The GCI 4.0 allows economies to monitor progress over time. This approach emphasizes that competitiveness is not a zero-sum game between countriesit is achievable for all countries. Global Findings and Implications Enhancing competitiveness is still key for improving living standards Sustained economic growth remains a critical pathway out of poverty and a core driver of human development. In fact, there is overwhelming evidence that growth has been the most effective way to lift people out of poverty and improve their quality of life. For least-developed countries LDCs and emerging countries, economic growth is critical for expanding education, health, nutrition and survival across populations. With a decade left, the world is not on track to meet most of the 17 United Nations’ Sustainable Development Goals by the deadline of 2030. On Goal 8 Decent Work and Economic Growth, LDCs have consistently missed the target of 7 growth since 2015. Extreme poverty reduction is decelerating. At current pace, it is estimated that by 2030 the rate will stand at about twice the 3 target set in Goal 1. As of 2015, 46 of the world’s population struggled to meet basic needs. Hunger is on the rise again and affects one in nine people in the world. The “zero hunger” target set by Goal 2 will almost certainly be missed. It is clear that for most of the past decade, growth has been subdued and has remained below potential in many developing countries. Economic development is not a pre-determined destiny. Pro-active efforts are needed to start and sustain the development process. The GCI 4.0 highlights the profound competitiveness deficit that needs to be urgently addressed to restore productivity and growth to improve living standards. cutive Summary The 2019 edition of The Global Competitiveness Report series, first launched in 1979, features the Global Competitiveness Index 4.0 GCI 4.0. As the decade concludes and we look towards the dawn of the 2020s, the GCI 4.0 offers insights into the economic prospects of 141 economies. Drawing on these results, the report provides leads to unlock economic growth, which remains crucial for improving living standards. In addition, in a special thematic chapter, the report explores the relationship between competitiveness, shared prosperity and environmental sustainability, showing that there is no inherent trade-off between building competitiveness, creating more equitable societies that provide opportunity for all and transitioning to environmentally sustainable systems. However, for a new inclusive and sustainable system, bold leadership and proactive policy-making will be needed, often in areas where economists and public policy professionals cannot provide evidence from the past. The report reviews emerging and promising ‘win- win’ policy options to achieve the three objectives of growth, inclusion and sustainability. The Global Competitiveness Index 4.0 An Economic Compass for Uncertain Times Introduced in 2018, the GCI 4.0 provides a detailed map of the factors and attributes that drive productivity, growth and human development in the era of the Fourth Industrial Revolution. The 2019 edition covers 141 economies, which account for 99 of the world’s GDP. The index is anchored in growth accounting economic literature and aims to measure the drivers of ‘total factor productivity’ TFP, the part of economic growth that is not explained by the growth in the factors of production. TFP can be interpreted as how smartly these factors are used and is the main determinant of long-term economic growth. To put it simply, how efficiently units of labour and capital are combined for generating output. The GCI 4.0 is the product of an aggregation of 103 individual indicators, derived from a combination of data from international organizations as well as from the World Economic Forum’s cutive Opinion Survey. Indicators are organized into 12 ‘pillars’ Institutions; Infrastructure; ICT adoption; Macroeconomic stability; Health; Skills; Product market; Labour market; Financial system; Market size; Business dynamism; and Innovation capability.cutive Summary The global economy is ill-prepared for a downturn after a lost decade for productivity-enhancing measures Persistent weaknesses in the drivers of productivity growth, highlighted by the GCI 4.0, are among the principal culprits of the lacklustre perance and frailty of the global economy over the past decade. Productivity growth started slowing down well before the financial crisis and had decelerated in its aftermath. The financial crisis may have contributed to this deceleration through “productivity hysteresis”. Furthermore, beyond strengthening financial system regulations, many of the structural res designed to revive productivity did not materialize. The 2019 results of the GCI 4.0 reveal the size of the global competitiveness deficit. The average GCI score across the 141 economies studied is 60.7, meaning that the ‘distance to the frontier’ stands at almost 40 points. On nine of the 12 pillars, the average gap globally stands at more than 30 points. Advanced economies per consistently better than the rest of the world, but overall, they still fall 30 points short of the frontier. Singapore, the best perer overall, still falls 15 points short of the ideal. While the predicted slowdown is unlikely to be nearly as severe as the Great Recession of 2008–2009, policy-makers generally have fewer policy options today than they did back then to stimulate aggregate demand. Monetary policy may have run out steam and some countries are facing a liquidity trap. Furthermore, the geopolitical context is more challenging than in 2007, with gridlock in the international governance system, and escalating trade and geopolitical tensions fuelling uncertainty, which holds back investments, and increases the risk of supply shocks. Policy-makers must look beyond monetary policy to other policies, investments and incentives for reviving productivity growth Since the Great Recession, policy-makers have kept the global economy afloat primarily through loose and unconventional monetary policy. But despite the massive injection of liquidityfour among the world’s major central banks alone injected over 10 trillion between 2008 and 2017productivity growth has continued to stagnate over the past decade. Although loose monetary policy mitigated the negative effects of the global financial crisis, it may have also contributed to reducing productivity growth by encouraging capital misallocation. W