According to the recently published IMD World Competitiveness Yearbook, the U.S. no longer ranks as the most competitive economy among the world’s 58 largest countries.
Indeed, after topping the IMD’s competitiveness ranking for the past 20-plus years, the U.S. slipped to third place, trailing first-ranked Singapore and second-place Hong Kong.
This continental shift in ranking is a clear reflection of the recent increase in Asia’s economic vitality compared to North America in general and the U.S. in particular.
Other countries that have benefited from Asia’s relative economic strength include Australia, which saw its competitiveness ranking increase from 12th place in 2007 to 5th place in 2010; Taiwan, which jumped from 23rd place in 2009 to 8th place in 2010; and Malaysia, which rose from 18th place to 10th place over the same period.
Despite the downgrade of the U.S., our largest trading partner, the IMD boosted Canada’s competitiveness ranking among the 58 largest economies to 7th place in 2010, up from 8th place in 2009.
This increase in Canada’s rank stemmed from a solid banking system, the prospect that public finances will be effectively managed over the next few years, plus an extensive level of basic infrastructure.
Factors that weighed on Canada’s relative level of competitiveness included: the significant increase in governments’ budgetary deficits at all levels; the deterioration in the current account; relatively high personal income tax rates; and the sharp rise in the nation’s unemployment rate.
Looking ahead, the IMD noted that the “old” industrialized countries – including Japan, Italy, Portugal, Belgium, the U.S., Iceland, Greece, France, Germany, and the UK – all will be burdened by a high level of government debt that in some cases could last for the next several decades.
Based on the IMD’s current assessment, Canada is not included in this heavily indebted group of countries. However, it is perilously close to being so.