GCI 2016-2017: The context
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Attilio Di Battista
Margareta Drzeniek Hanouz
Daniel Gómez Gaviria
World Economic Forum
The Global Competitiveness Report 2016–2017 comes out in the context of persistent slow growth and a near-term outlook that is fraught with renewed uncertainty fueled by continued geopolitical turmoil, financial market fragility, and sustained high debt levels in emerging markets. Despite unorthodox monetary policy, global GDP growth has fallen from levels of 4.4 percent in 2010 to 2.5 percent in 2015. This fall in growth reflects not only the productivity slowdown documented in last year’s Report, which has continued during 2016, but also what now seems like a long-term downward trend in investment rates.1
Future growth prospects are constrained by longer-term trends. Many economies around the world struggle with the double challenges of slowing productivity growth and rising income inequality, often exacerbated by rapidly aging societies. Stagnating and unequally distributed income growth in turn has opened the door to more inward-looking policies, mounting protectionist pressures, and a general questioning of the premises underlying globalization in many economies—most visibly embodied in the recent Brexit vote. At the same time, in emerging markets, the end of the commodity super-cycle has led to an abrupt economic slowdown that has exposed the slow pace or lack of competitiveness-enhancing reforms in recent years, which could increase polarization and threaten social cohesion.
On the bright side, tremendous promise for higher economic growth and societal progress dawns with the Fourth Industrial Revolution.2 Based on digital platforms, the Fourth Industrial Revolution is characterized by a convergence of technologies that is blurring the lines between the physical, digital, and biological spheres (Box 1). Breakthroughs in technologies such as artificial intelligence, biotechnology, robotics, the Internet of Things, and 3D printing, to name a few, will provide new avenues for growth and development in the future but could also give rise to significant social challenges.
The political and ideological constraints placed on fiscal policy in the wake of the financial crisis left monetary policy as the only option for governments in advanced economies to try to avert secular stagnation.3 Although this may have been successful in stabilizing growth in the short term, ensuring a higher future growth path will necessitate continued competitiveness-enhancing supply-side reforms and investment to strengthen productive sectors. And as the Fourth Industrial Revolution is gathering speed, it will be increasingly important to support the emergence of new sectors of economic activity through competitiveness reforms that foster innovation. Yet, as the Global Competitiveness Index (GCI) shows, to date, progress in building an enabling environment for innovation remains the advantage of only a few economies. Last but not least, future growth will also depend on the ability of economies to safeguard the benefits of openness to trade and investment that has led to record reductions in poverty rates in recent decades.4
Against this background, this Report serves as a critical reminder of the importance of competitiveness in solving both our international macroeconomic challenges and laying the ground for future prosperity.
Recovering growth in the context of the Fourth Industrial Revolution will require the recognition that policymakers need a shared assessment and understanding of the future sources of competitiveness. By reducing complexity and providing a tool to identify strengths and weaknesses and track progress, the Report serves as a means to inform this conversation and to support policymakers, businesses, and civil society in their development of a shared long-term vision (see Box 2 for two examples of how the Report is being used).
In the next section of this chapter we present the methodology and framework underpinning the GCI. It is followed by an overview of the results, where we develop the key findings. The chapter continues by exploring regional highlights, showing great differences within regions and their main competitiveness gaps, trends, and challenges. Highlights for selected economies in the top 10 of the rankings, G20 economies, and countries selected for World Economic Regional Summits in 2017 follow.
The second chapter presents the framework of the modernized Global Competitiveness Index and some preliminary results, building on work presented in The Global Competitiveness Report 2015–2016. It highlights new indicators, new concepts of innovation, new approaches to measuring human capital, and a new approach to policy prioritization. The third chapter describes the Executive Opinion Survey, an invaluable and unique source of current data from which we derive a large number of indicators used in the GCI. The Country/Economy Profiles section at the end of the Report presents the detailed GCI results by economy and is a useful complement to the present chapter.5