General questions relating to the Global Competitiveness Index
The Global Competitiveness Report defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve.
Economists agree that productivity is the defining factor of long-term prosperity and the main factor explaining cross-country income differences. There can be only limited progress in the standards of living of citizens if the economy lacks the fundamental factors that make such progress sustainable. Being competitive also means being resilient, maintaining high standards of living and adapting to shocks (e.g. financial crises) or new realities such as globalization or disruptive technologies.
The report analyses competitiveness along 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. These are, in turn, organized into three subindices in line with three main stages of development: basic requirements, efficiency enhancers, and innovation and sophistication factors. The three subindices are given different weights in the calculation of the overall index, depending on each economy’s stage of development, as proxied by its GDP per capita and share of exports represented by mineral raw materials.
By providing a tool to identify strengths and weaknesses and track progress, the report serves to inform and support policy-makers, businesses and civil society in their development of a shared, long-term vision. Beyond the vision, enhancing competitiveness is a complex and often protracted process that demands difficult trade-offs, careful consideration for sequencing reforms and room for calibration in changing conditions. Steering the course towards enhanced competitiveness requires vigilance and commitment from all stakeholders and throughout the process, for which the report serves as a guide and monitoring tool.
The GCI uses the World Economic Forum’s annual Executive Opinion Survey to capture concepts that require a more qualitative assessment, or for which comprehensive and internationally comparable statistical data are not available. For this year’s GCI, more than 14,000 business leaders in 140 economies were surveyed on topics related to national competitiveness. It also uses statistical data from internationally recognized agencies, notably the International Monetary Fund; the United Nations Educational, Scientific and Cultural Organization; and the World Health Organization.
The exact share of EOS data in the 113 indicators used to calculate the index varies slightly by country, depending on its stage of development. In general, approximately two-thirds of the data used in the GCI 2015-2016 are derived from the Executive Opinion Survey and one-third is derived from international sources’ statistics.
The calculation of the GCI takes place in three steps. In the first step, the indicators in each pillar are aggregated using a simple average to obtain the 12 pillar scores. In the second step, the pillar scores are aggregated in the three subindices (basic requirement, efficiency enhancers, and innovation and sophistication factors), again applying a simple average. In the third step, the overall GCI score is calculated by aggregating the subindices, depending on the stage of development, using the following weighting scheme.
The Forum relies on its network of Partner Institutes to administer the annual Executive Opinion Survey at the national level. Partner Institutes are recognized research or academic institutes, business organizations, national competitiveness councils or other established professional entities and, in some cases, survey consultancies that have a strong private-sector network. Partner Institutes have at their core a commitment to improving the competitiveness conditions of their economies. Exceptionally, for the US, we work with a survey company for the collection of surveys. We aim to increase the coverage of countries; however, due to instability in some cases, it is not feasible to collaborate with a Partner Institute to conduct the survey. The full list of Partner Institutes can be found here: http://www3.weforum.org/docs/gcr/2015-2016/GCR_PartnerInstitutes_2015-16.pdf
The GCI rests on its unique data drawn from the Executive Opinion Survey, which surveys top business executives in all countries covered. This data is an important tool that allows us to capture many of the qualitative aspects that affect competitiveness, such as quality of infrastructure or quality of the institutional framework, for which other data is not available for the large number of countries we cover. It also reflects the opinion of executives who take the investment decisions and therefore influence a country’s future economic growth.
The Global Competitiveness Report 2015-2016
This year’s report covers 140 economies. In this edition, because of absence of data, we could not include Angola, Barbados, Burkina Faso, Libya, Puerto Rico, Suriname, Timor-Leste or Yemen. However, Benin, Bosnia and Herzegovina, Ecuador and Liberia, which could not be included in the last edition, have been reinstated this year. Altogether, the combined output of the economies covered in the GCI represents 98.3% of world GDP.
The recovery from the global financial crisis has been less robust, more uncertain and taken longer than many expected, suggesting a “new normal” of subdued economic growth, lower productivity growth and high unemployment. Productivity-enhancing reforms are the key to breaking out of this new normal.
In addition, the historic proportions of the economic crisis and the relative performance of economies since its onset in 2008 have shed light on how structural weaknesses can exacerbate the effects of and hinder recovery from shocks. Over the past years, the more-competitive economies systematically outperformed the least competitive in terms of economic growth; they either withstood the crisis better or recovered more quickly. This suggests that competitiveness drives resilience, which is important in light of future potential shocks.
Last but not least, unemployment spiked in almost every country after the crisis, but individual countries have widely different trajectories. From a peak in 2010, the most competitive economies have managed to bring unemployment down towards pre-crisis levels. In less competitive countries, unemployment has remained well above pre-crisis levels. An economy’s capacity to leverage talent is therefore at the heart of its competitiveness.
One salient finding is the confirmation that competitiveness drives resilience. In the seven years since the beginning of the crisis, we see that countries that were more competitive before the crisis – such as Switzerland or Germany – were not hit as hard; or managed to recover more quickly – such as the United States. In contrast, countries that were less competitive pre-2007 are still having difficulties in regaining moderate growth – such as Greece and Italy.
Our analysis does not look at short-term growth prospects, but at factors that determine sustained growth in the longer run.
All data used in the Global Competitiveness Report can be downloaded at: http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf
When data for which the World Economic Forum is the source (herein “World Economic Forum”), as specified in the Technical Notes and Sources section of the report, is distributed or reproduced, it must appear accurately and be attributed to the World Economic Forum. Users who intend to sell World Economic Forum data as part of a database or as a stand-alone product must first obtain permission from the World Economic Forum ([email protected]).
Published since 1979, the Global Competitiveness Report series is today the world’s most comprehensive assessment of national competitiveness. However, the way the Forum has been measuring competitiveness has evolved since Professor Klaus Schwab came up with the first competitiveness scoreboard. The current framework, the GCI, produced with the supervision of Professor Xavier Sala-i-Martin, has been published since 2005.