Canada’s Competitiveness Grew But Not Enough

Index overall
Canada is no more in the top 10
most competitive countries in the world.

Canada fell from tenth to twelfth place in the list of most competitive economies in the world, according to the Global Competitiveness Report 2011-12 released by the World Economic Forum. Although Canada’s absolute score has almost not changed over the past three years, Canada has dropped three spots in the global rankings since 2009. There are two main reasons for the fall: the strength of emerging economies and Canada’s weak adaptation to globalization.

Stagnation in the Advanced World vs. Growth in the Developed World

Canada has been one of most developed countries in the world for years, but it suffered from the crisis as well as the other most advanced economies, and it’s now seeing only a sluggish recovery and uncertainty over the economic outlook while much of the developing and emerging economies (particularly in Asia) are getting stronger. According to the Conference Board of Canada, a partner institute in preparing the report, developing countries are closing the gap between traditional rich and poor countries. But in fact, only few of them have improved their ranking, and there are many poor countries with no hope of significant improvement. The weak economic performance in the US and Europe only allow strengthening countries to gain higher rankings, but have little impact on their score.

Canada’s Weakness

Many countries struggle with worsening
macroeconomic environment.

Canada has traditionally had the soundness banking system. Education, country credit rating, infrastructure, transparent institutions, health system, and efficient markets in the country are Canada’s other advantages that have contributed the most to its score. However, Canada’s poor macroeconomic environment ranks 49th,its national savings as a percentage of its GDP ranks 80th, and its government debt as a percentage of its GDP is 14th highest in the world.

“Canada should not be satisfied with its 12th place ranking. Much more can be done to improve productivity, economic performance, and global competitiveness,” said Michael Bloom, Vice-President, Organizational Effectiveness and Learning. “Businesses continue to under-perform in using our peoples’ skills and knowledge to generate new or improved products, processes or services. And Canadian businesses do not appear to be adapting adequately to globalization or building effective global value chains as quickly as their international competitors.”

Top Ten

The top ten countries remained almost unchanged: only the UK returned to the list as it recovers from the crisis with a score 0.03 higher than Canada. Switzerland took first place again, with most indicators among the best in the world, including macroeconomic environment. The US fell from fourth to fifth, resulting in the third consecutive decline. Japan dropped three places to the ninth place due to a high budget deficit and an extremely high debt level (over 220 percent of its GDP).

Singapore, a leader among Asian economies, improved its competitiveness to second place with its highly-ranked infrastructure and education focus. Germany, at sixth place, benefits from its market size (fifth) and great business conditions, but its labour market flexibility is very low (125th). Nordic nations, Finland (fourth), Sweden (third), Denmark (eighth) and the Netherlands (seventh) have one of the best-functioning institutional frameworks and innovative business.

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