The Worst Economies in the World

September 9, 2014 by Thomas C. Frohlich


After sliding for four consecutive years, the United States moved up two places for the second year in a row in the World Economic Forum’s competitiveness rankings, from fifth last year to third in 2014. A combination of factors, including improving business sophistication and institutional frameworks, helped the U.S. improve, despite perceptions of inefficient government and a weak macroeconomic environment.

The WEF’s Global Competitiveness Report defines competitiveness as the “set of institutions, policies, and factors that determine the level of productivity of a country.” In order to assess competitiveness, the WEF divided the 144 nations it surveyed into one of three classifications, depending on their stage of development.

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According to the WEF’s report, factor-driven economies are the least developed, typically relying on low-skilled labor and natural resources. More developed countries are considered efficiency-driven economies because they focus on improving economic output by increasing production efficiency. The most developed economies, which rely on innovation and technological changes to drive growth, are considered innovation-driven economies. Nations may also fall between these classifications.

A country’s competitiveness and economic development is highly correlated with its gross domestic product. The 10 least competitive countries had extremely low levels of economic output. Three countries — Mauritania, Burundi, and Sierra Leone — had a GDP of less than $10,000 per capita, substantially lower than the vast majority of other countries reviewed.

The most competitive countries, on the other hand, had among the 25 highest GDPs per capita last year. Norway, Singapore, and Hong Kong SAR all had among the five highest GDP per capita.

In an interview with Margareta Drzeniek, director and lead economist of the Global Competitiveness and Benchmarking Network for the World Economic Forum, explained that the WEF measures competitiveness along 12 broad metrics, called pillars, in order to see “which of the drivers actually drive productivity in a country and what are their strengths and weaknesses.”

As Drzeniek noted, economic development relies on good institutions and education. Institutions “influence investment decisions and the organization of production,” while playing a “key role in the ways in which societies distribute the benefits and bear the costs of development strategies.”

While the most competitive economies tend to rank very highly in the WEF’s various metrics, the least competitive fall short. Every country except for Timor-Leste ranked in the bottom 15 for the provision of basic economic requirements, such as institutions, infrastructure, and education. These economies have also yet to develop quality infrastructure such as roads, telecommunication systems, or transportation networks.

Maintaining strong nationwide institutions and infrastructure often requires a great deal of investment. The least competitive nations typically lack the ability to borrow large sums of money in order to finance investment. All but one of these nations had government debt of equal to or less than 50% of GDP, and most had less than 30% of GDP in such debt.

With only a few exceptions, the world’s least competitive countries have relatively low debt levels. In these poorer nations, access to financing is often a challenge not just for businesses but also for governments.

Still, the least competitive nations face larger impediments than debt. When discussing fundamental prerequisites for any nation, Drzeniek noted that “any nation requires fairly strong leadership.” In the least competitive countries, leadership issues can “prevent progress for countries’ competitiveness due to countries not making investment or functioning well.” Most have experienced a major regime change in the past two decades.

To identify the most and least competitive economies in the world, 24/7 Wall St. reviewed the WEF’s Global Competitiveness Report for 2014-2015. The WEF has generated a Global Competitiveness Index (GCI) since 2005, which includes weighted average measurements for 114 components making up 12 pillars. Weights for various pillars depend on the country’s stage of development. All GDP figures, as well as figures on government debt as a percentage of GDP, were provided to the WEF by the International Monetary Fund.

These are the worst economies in the world.

10. Burkina Faso
> GCI score (1-7): 3.21
> GDP per capita: $1,578 (12th lowest)
> Debt as a pct. of GDP: 33.3% (46th lowest)
> Pct. of residents using Internet: 4.4% (12th lowest)
> Biggest problem in doing business: Access to financing

Burkina Faso is a factor-driven economy, the first stage of development, which means it competes based primarily on unskilled labor and natural resources. Burkina Faso is a large cotton producer, and its economy is highly dependent on both cotton and gold. The small sub-Saharan nation is also quite poor, with a GDP of just $1,578 per capita. Only about two-thirds of school-aged children were enrolled in primary school in 2012, and life expectancy was among the lowest worldwide at just 56 years as of last year, both much lower than in most countries. Poor infrastructure has also likely impeded development. Road quality and the country’s electricity supply were rated nearly the worst. A turbulent history of military coups and frequent droughts have also likely hindered the nation’s development.

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9. Timor-Leste
> GCI score (1-7): 3.17
> GDP per capita: $22,808 (41st highest)
> Debt as a pct. of GDP: N/A
> Pct. of residents using Internet: 1.1% (the lowest)
> Biggest problem in doing business: Access to financing

Timor-Leste, also known as East Timor, is one of the world’s least competitive countries. After many decades of often-violent colonial rule from neighboring Indonesia and other countries, Timor-Leste achieved independence only in 2002. The country’s independence is widely regarded as one of the United Nations’ most successful projects. However, the young nation’s economy is still in its earliest phases. While economic output is strong compared to other uncompetitive nations, exports accounted for just 1% of GDP, the lowest proportion worldwide. Technology is also extremely sparse. Just 1.1% of the population had access to the Internet last year, and for every 200 people there was less than one broadband subscription, both among the lowest rates in the world.

8. Haiti
> GCI score (1-7): 3.14
> GDP per capita: $1,362 (8th lowest)
> Debt as a pct. of GDP: 21.3% (20th lowest)
> Pct. of residents using Internet: 10.6% (22nd lowest)
> Biggest problem in doing business: Inadequate supply of infrastructure

Haiti is the poorest nation in the Western Hemisphere. According to the Haitian government, more than 300,000 people were killed during a 2010 earthquake, although this figure is highly disputed. Country residents are split between the relatively poor Creole-speaking majority, and the relatively well-off French-speaking minority. Inadequate infrastructure is the nation’s most problematic factor for doing business, according to local businesspeople surveyed, followed by corruption and inadequate access to financing.

7. Sierra Leone
> GCI score (1-7): 3.10
> GDP per capita: $1,637 (13th lowest)
> Debt as a pct. of GDP: 32.6% (44th lowest)
> Pct. of residents using Internet: 1.7% (5th lowest)
> Biggest problem in doing business: Access to financing

Sierra Leone is among the countries at the heart of the current Ebola outbreak, and the fallout from the outbreak has been exacerbated in part by the nation’s poor infrastructure. Even before the epidemic, Sierra Leone struggled with health issues. A newborn was expected to live just 45 years in 2013, and there were more than 117 infant deaths per 1,000 live births, both the worst rates among all countries reviewed. Last year there were also an estimated 674 new cases of tuberculosis per 100,000 residents, nearly the worst rate. In addition to health-related deficiencies, the country’s telecommunications and infrastructure were rated poorly. Only a minority of the population have mobile phone subscriptions, and the country’s air transport system is particularly bad.

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6. Burundi
> GCI score (1-7): 3.09
> GDP per capita: $665 (2nd lowest)
> Debt as a pct. of GDP: 31.7% (40th lowest)
> Pct. of residents using Internet: 1.3% (3rd lowest)
> Biggest problem in doing business: Corruption

Like most of the least competitive countries, Burundi has struggled to recover from a long history of political unrest. The 12-year civil war that ended in 2005 claimed the lives of hundreds of thousands and devastated the country. In addition, like neighboring Rwanda, hundreds of thousands of Burundi residents have been killed over the years due to ethnic tensions. These conflicts have likely hindered the country’s long-term development. The quality of math and science education, for example, was rated among the worst in the world. Technology is also largely unavailable to Burundi residents as just 1.3% of the population had access to the Internet, less than all but two other countries reviewed.

5. Angola
> GCI score (1-7): 3.04
> GDP per capita: $6,638 (45th lowest)
> Debt as a pct. of GDP: 26.6% (29th lowest)
> Pct. of residents using Internet: 19.1% (41st lowest)
> Biggest problem in doing business: Access to financing

Angola’s economy has grown considerably in the last decade largely due to an oil boom. Angola is Africa’s second-largest exporter of oil, and its GDP is the fifth-largest on the continent. Angola’s 27-year civil war devastated the country’s economy and infrastructure. Although it has recovered much, the country still has a long way to go. According to the African Development Bank, Angola remains far too reliant on oil, which accounts for a disproportionate share of the country’s economy, as well as most of the country’s exports and government revenues. Access to financing and rampant corruption are among the most problematic factors for doing business in the country. And despite aggressive construction projects, the overall quality of infrastructure was rated at nearly the worst among all countries reviewed.

4. Mauritania
> GCI score (1-7): 3.00
> GDP per capita: $2,331 (21st lowest)
> Debt as a pct. of GDP: 87.7% (22nd highest)
> Pct. of residents using Internet: 6.2% (17th lowest)
> Biggest problem in doing business: Access to financing

Like several other African nations, Mauritania is both one of the world’s poorest nations. While much of the population remains highly dependent on agriculture, segments of Mauritania’s economy utilize natural resource extraction for growth. The country started extracting oil off its western coast in 2006, and the Chinguetti and Tiof oil fields are expected to hold enormous quantities of oil reserves. Future prosperity may be hampered, however, by underdeveloped financial institutions and poor health among the country’s residents. Access to financing was cited as — by far — the most problematic factor for doing business in the country. Additionally, there were 350 new cases of tuberculosis last year, among the highest rates in the world. Tuberculosis will continue to have a serious impact on Mauritanian business in the next five years.

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3. Yemen
> GCI score (1-7): 2.95
> GDP per capita: $2,396 (23rd lowest)
> Debt as a pct. of GDP: 49.9% (57th highest)
> Pct. of residents using Internet: 20.0% (43rd lowest)
> Biggest problem in doing business: Inadequate supply of infrastructure

Limitations on doing business in Yemen stem primarily from security concerns. With the allies waging war on al-Qaeda in Afghanistan throughout much of the past decade, al-Qaeda found a haven in Yemen. The threat of terrorism, crime, and violence pose some of the greatest costs to doing business in Yemen, according to WEF. National police services were also rated among the least reliable in the world. The state of the country’s infrastructure is perhaps even more detrimental to competitiveness. The electrical supply, for example, is plagued with frequent interruptions and voltage fluctuations and is among the least reliable worldwide.

2. Chad
> GCI score (1-7): 2.84
> GDP per capita: $2,786 (27th lowest)
> Debt as a pct. of GDP: 30.2% (36th lowest)
> Pct. of residents using Internet: 2.3% (9th lowest)
> Biggest problem in doing business: Access to financing

Chad suffers from internal conflicts, poor education, and lack of infrastructure. Tensions in Chad come primarily from conflicts among the Muslim population in the northern part of the country and the largely Christian communities in the south. Less than a quarter of Chad’s school-aged population was enrolled in secondary education in 2012, the lowest rate among all countries reviewed. Even for students who go to school, educational resources are extremely scarce. The quality of Internet access in schools, for example, was rated the worst in the world. The overall quality of Chad’s infrastructure was also rated worse than every country reviewed.

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1. Guinea
> GCI score (1-7): 2.79
> GDP per capita: $1,178 (5th lowest)
> Debt as a pct. of GDP: 37.8% (57th lowest)
> Pct. of residents using Internet: 1.6% (4th lowest)
> Biggest problem in doing business: Access to financing

Guinea was rated by the WEF as the world’s least competitive economy. No country was awarded a worse rating for the provision of basic requirements. The lack of infrastructure is especially problematic for the country, which had some of the world’s lowest quality roads and poorest electricity supply. A macroeconomic environment characterized by a lack of savings and high inflation also limits Guinea’s competitiveness. The country, which is rich in metals resource, derives much of its export revenue from bauxite — used in making aluminum. However, Guinea’s weak economic development makes attracting investment to its mining sector difficult. Access to financing was cited as the greatest problem for doing business in Guinea.