Marking its fourth year of decline, the United States, the world’s largest economy, has fallen another two spots to 7th in the world’s most competitive economies. A lack of macroeconomic stability, business community’s continued mistrust in the government, and concern over fiscal health contributed to the fall. Click below to read more.
The United States has slipped further down a global ranking of the world’s most competitive economies, according to a World Economic Forum (WEF) survey released on Wednesday.
“A number of weaknesses are chipping away at its competitiveness…the U.S. fiscal imbalances and continued political deadlock over resolving these challenges,” said Jennifer Blanke, Economist at the Geneva-based WEF.
Political deadlock over reducing the unsustainable federal government budget deficit – projected to hit $1.1 trillion this year – prompted Standard & Poor’s to downgrade the country’s credit rating by one notch to AA+ from AAA last August.
A mix of U.S. tax hikes and spending cuts – referred to as the “fiscal cliff” – are set to come into force in January unless lawmakers reach a compromise for avoiding them.
The survey, which has been conducted annually for over three decades, ranks the competitiveness of 144 countries based on 12 key indicators including infrastructure, macroeconomic environment, labor market efficiency and innovation.
Despite declining in the overall ranking, the forum highlighted that the U.S. remains one of the world’s top innovators – supported by an “excellent” university system – and continues to offer vast opportunities because of the sheer size of its domestic economy.
Switzerland and Singapore retained their positions as the most competitive economies, coming in 1st and 2nd, respectively.
China Tops the BRICs
Among the large emerging economies, China was ranked highest at 26, thanks to favorable macroeconomic conditions. This was significantly higher than Brazil, India and Russia which came in at 53, 56 and 66, respectively.
China runs a moderate budget deficit, boasts a low government debt-to-GDP ratio of 26 percent and its gross savings rate remains above 50 percent of GDP, the forum said. In addition, the rating of its sovereign debt (AA-) is significantly better than that of the other BRICs and of many advanced economies.
