New World Economic Competitiveness Report Released

The Institute for Management Development (IMD), based in Switzerland, has just released its 2003 world economic rankings report. It says that the United States is once again the best of the large economies and that Finland was number one in the smaller economies group.

Here are some of the major points made in the report:

* It is not a recession that is starving national and local economies -- it’s "economic anemia"; it is more pernicious and just as bad. This same view was reflected in an editorial by the publisher of the Washington Post just last week. He called the problem "economic stagnation," which is what has afflicted Japan's economy over the past decade.

* The U.S. economy is fairly resilient, thanks to interest rate cuts and consumer spending. However, the current account deficit (4.8% of GDP), the expected budget deficit ($300 billion) and proposed tax cuts may push foreign debt up and the dollar down further.

* Europe battles with deficits and the ability to reform governments. Over-regulation and complexity hamper its growth. Joining members of the EU perform better.

* Latin America continues to struggle to overcome the side effects of the implosion of Argentina and Venezuela. Brazil’s new administration has been well received so far.

* Asian economies were just beginning to pick-up again, but the SARS epidemic is jeopardizing their recovery.

* Oil prices are back to reasonable prices ($24) after the Iraqi war.

* The collapse of stock markets has forced the financial sector, once a buffer in periods of slowdown, to restructure just as drastically as industry.

* Pension funds have lost $2,800 billion worth of assets. A time bomb is ticking.

* Corporate debt has increased five-fold in the US in 20 years. If interest rates go up again, many companies could go bankrupt.

* The IT sector continues to consolidate and is no longer the locomotive of growth in the world economy. What will be the next big hype? Wireless? I would add life sciences and biotech to the list of silver bullets.)

* Confidence in business leaders is at an all-time low. Trust in numbers and people has been destroyed. Legislation on accounting, auditing, and corporate governance will step in.

* Competitiveness key words for 2003: back to fundamentals, simple, solid, no-nonsense, adaptive, transparent, and honest.

The report analyzes the world's national economies according to various criteria, including public financial strength, infrastructure, economic performance, business efficiency, and government efficiency.

Download the report here.