Special Report

The Best and Worst Economies in the World

 The global economy is projected to grow by 3.3% this year, considerably slower than in 2014. According to the International Monetary Fund (IMF), growth among advanced economies such as the United States appears to be picking up slightly, while growth in emerging markets and developing economies is slowing.

The World Economic Forum (WEF) Global Competitiveness Report defines competitiveness as the “set of institutions, policies, and factors that determine the level of productivity of a country.” For the WEF, healthy economies promote long-term sustainable growth and provide a high standard of living for residents. In order to assess competitiveness, the WEF classified the 140 nations it surveyed according to three stages of development. The nations surveyed account for 98.3% of the world’s economic output.

Since national economic growth tends to follow common stages of development, the WEF weighted its index to avoid penalizing countries in the earliest stages of growth. In other words, maintaining competitiveness at one stage of development is very different than being competitive in another.

Click here to see the most competitive economies in the world.

Click here to see the least competitive economies in the world.

In the earliest stage, economies are factor driven, which means sustainable growth depends primarily on relatively unskilled labor and natural resources. When productivity and wages grow under this model, a country advances into an efficiency-driven economy in which higher education and product quality become more important for economic health. In the most advanced economies, known as innovation-driven nations, technology and sophisticated production techniques are necessary to maintain competitiveness.

The United States is often unfavorably compared to other developed nations. Critics cite the country’s high incarceration rates, bloated health and education costs, and lower life expectancy. Despite these issues, the United States is one of the most competitive global economies in the world, according to the WEF. While the country is weighed down by factors such as health and the quality of K-12 education, competitiveness in the U.S. is bolstered by the high share of college-educated residents, a high capacity for innovation, availability and adoption of the latest technologies, and by overall economic prosperity. The United States has the second highest GDP per capita in the world.

While GDP per capita is commonly used as a measure of economic success, it frequently fails to capture the true health of an economy. In an email to 24/7 Wall St., experts at the WEF explained that GDP per capita “does not reflect issues that relate to the long-term sustainability of that GDP level. High GDP per capita might be due to conditions that cannot be necessarily maintained in the long-term such as availability of natural resources and high public spending.”

Still, a country’s competitiveness is highly related to its economic output. All of the 10 most competitive countries had among the 25 highest GDPs per capita in 2014. Four of the 10 — Hong Kong, Singapore, Switzerland, and the United States — had among the 10 highest GDP per capita, at no less than $50,000. The opposite tends to be true among the least competitive countries.

While the WEF did not take geographical proximity into account in its index, geographic conditions nonetheless seem to influence economic development. Several of the most prosperous economies are clustered in northern Europe, while the least competitive nations are far more likely to be in Africa or South America. As experts at the WEF noted, “Economies in the same region often share common history, culture, [and] access to common markets.” The advantages — or disadvantages — of the presence of natural resources or climate also play a major role in the development of national economies.

To identify the most and least competitive nations in the world, 24/7 Wall St. reviewed The Global Competitiveness Report 2015-2016 from the WEF. The report uses an index consisting of 114 measures organized into 12 pillars to assess the economic prosperity, or competitiveness, of 140 countries. All GDP figures, including debt as a percentage of GDP, were provided to the WEF by the International Monetary Fund (IMF). All data, unless otherwise specified, are from the most recent available year.

These are the most (and least) competitive countries in the world.

The Most Competitive Economies

10. United Kingdom
> 2014 GDP:
$2.55 trillion
> Life expectancy: 81.0 years
> Gov’t debt as % of GDP: 89.5%
> Patent applications per 1 million people: 89.9

The United Kingdom is one of largest economies in the world and is a leader in many measures of innovation and efficiency. Home to Oxford University, University College of London, Cambridge, and other major institutions, the U.K. has the second best research universities in the world, second only to Switzerland. The U.K has potential to bring in outside investors, with the fourth best investor protection of any country. It also had the fourth best capacity to attract talented workers. Maintaining strong institutions and quality infrastructure often requires a great deal of investment, and like many other competitive nations, the UK has the means to borrow large sums of money. The country’s debt was equal to nearly 90% of its GDP, one of the highest general government debt levels worldwide.

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9. Sweden
> 2014 GDP:
$448.25 billion
> Life expectancy: 81.7 years
> Gov’t debt as % of GDP: 41.5%
> Patent applications per 1 million people: 312.5

Sweden ranks as the ninth most competitive economy in the world. Being technologically advanced is important to a nation’s competitiveness, and the Scandinavian nation is one of the most advanced in the world. For example, 92.5% of the country’s residents use the Internet, seventh-most in the world. The nation’s citizens and corporations were among the most likely to harness new technologies to improve efficiency. The country for availability of the newest technologies as well. Sweden is also one of the most innovative nations in the world. The country files an average of 312.5 patents per million residents, the third-most in the world.

8. Finland
> 2014 GDP:
$221.04 billion
> Life expectancy: 80.8 years
> Gov’t debt as % of GDP: 59.6%
> Patent applications per 1 million people: 294.0

Finland slid from fourth to eighth place in the GCI this year, partially due to declining economic conditions. Last year, Finland’s economy contracted for the third year in a row, largely due to a decrease in exports, particularly technology and paper. Despite the decline in trade, Finland remains one of the world’s most competitive nations with a strong foundation for sustainable long term growth. Finland’s institutions, for example, are the most transparent and protective in the world, and is superlative for its property rights, lack of organized crime, and ethical business practices. A prominent education system also accounts for Finland being one the most competitive world economies. Finland has provided the highest quality primary education in the world. In addition, Finnish students routinely perform among the best in the world on international standardized tests such as the Programme for International Student Assessment (PISA).

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7. Hong Kong SAR
> 2014 GDP:
$397.51 billion
> Life expectancy: 83.8 years
> Gov’t debt as % of GDP: 6.9%
> Patent applications per 1 million people: n/a

While Hong Kong is a territory of China, it is able to operate as a semi-independent nation. In fact, the territory is one of the most prosperous financial capitals in the world, and serves as a portal to international commerce and a hub of technological development. The nation’s current leader, CY Leung, is called the chief executive. So it is not surprising that Hong Kong rates as highly favorable to business. Hong Kong has one of the most favorable financial markets in the world, trailing only New Zealand in market efficiency.

Hong Kong also has the best infrastructure in the world. For example, its transportation system was rated among the best for ease of access and physical condition. It also has the best electricity and telephone networks in the world. No country has a higher rate of mobile telephone subscriptions, for example.

6. Japan
> 2014 GDP:
$4.75 trillion
> Life expectancy: 83.3 years
> Gov’t debt as % of GDP: 246.4%
> Patent applications per 1 million people: 334.9

Japan is home to one of the healthiest workforces in the world. Life expectancy for Japan’s 127.1 million residents exceeds 83 years, higher than in any of the other 10 most competitive nations.

After Switzerland, Japan ranks second globally in corporate spending on research and development. Japanese businesses are not the only entities investing in development. Most competitive nations have accumulated significant debt investing in public institutions and infrastructure. Partially due to the nation’s recent policy of government stimulus spending and quantitative easing to spur inflation, no country has accumulated more debt than Japan relative to its GDP. Japan’s debt is equivalent to 246.4% of its $4.75 trillion GDP. Heavy corporate and government investment may have bolstered national innovation. Japan applies for more patents per capita than any other nation, with an average of 334.9 patent applications per 1 million residents.

While Japan is a global leader by many measures, the Pacific island nation lags behind 82 other nations in female workforce participation.

5. Netherlands
> 2014 GDP:
$798.59 billion
> Life expectancy: 81.1 years
> Gov’t debt as % of GDP: 68.3%
> Patent applications per 1 million people: 208.9

The Netherlands moved up from being the eighth most competitive nation last year to rank as the fifth most competitive nation in the world this year. Though the country’s GDP is still below 2008 levels, the competitiveness of the Dutch economy was bolstered by strong performance and improvements in education and infrastructure — each ranking as the third best in the world. The Netherlands, which borders the North Sea, has the highest score in quality port infrastructure in the world.

Like all of the most competitive countries, the Netherlands is far from perfect. According to the WEF, in the most business friendly countries, wage levels are more often determined by individual companies. In the Netherlands, however, wages are often set by a centralized bargaining process, which can limit the flexibility of corporations in determining wages of their workers. The Netherlands ranks especially poorly for flexibility in wage determination, and restrictive labor regulations present the biggest obstacle for doing business in the Netherlands and is said to have hindered progress.

4. Germany
> 2014 GDP:
$3.72 trillion
> Life expectancy: 81.0 years
> Gov’t debt as % of GDP: 73.1%
> Patent applications per 1 million people: 225.2

Germany is the fourth most competitive country in the world. Though the country’s score remained unchanged from the previous year, Germany climbed up one spot on the WEF’s annual report. Like most competitive countries, Germany borrows large sums of money to invest in institutions and infrastructure. Though the current levels of debt mark a reduction from the previous year, government debt in the country stands at 73% of GDP.

Business is Germany’s greatest asset. The country ranks third in the world for its sophisticated business practices, and for using the latest technologies in production processes. As in many of the most competitive nations, government presented the biggest hindrance to German competitiveness. When asked to name the biggest impediments to doing business, Germans were most likely to cite inefficient government bureaucracy and complex tax regulations.

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3. United States
> 2014 GDP:
$17.42 trillion
> Life expectancy: 78.8 years
> Gov’t debt as % of GDP: 104.8%
> Patent applications per 1 million people: 160.3

The United States, one of 38 innovation-driven economies worldwide, remains in third place this year. The United States has the second largest market size of any country, just behind China. The U.S. labor market is also among the most flexible in the world, which means it can withstand wage fluctuations and workers can easily move from one economic activity to another. The United States also performs well in measures of innovation and business sophistication. American industries have the second best collaboration with universities in the world. While the American university system is part of one of the most innovative higher education institutions, the country trails other developed nations in other measures of education. The U.S. primary school system, which encompasses kindergarten through middle school, is rated worse than 28 other nations.

2. Singapore
> 2014 GDP:
$452.69 billion
> Life expectancy: 82.3 years
> Gov’t debt as % of GDP: 98.8%
> Patent applications per 1 million people: 127.0

The Republic of Singapore is a small city state off the southern coast of Malaysia, separated from Indonesia to the south by the Singapore Strait. Just 255 square miles in area and home to just 5.3 million people, the very densely populated Singapore also has one of the most advanced economies in the world. Singapore trails only one other country in competitiveness for the fifth consecutive year. The country’s higher education and training system — an essential component of a healthy labor market and competitiveness more generally — overtook Finland this year as the best in the world. When asked to identify the most problematic factors for doing business in Singapore, country residents identify restrictive labor regulation as the greatest obstacle.

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1. Switzerland
> 2014 GDP:
$472.83 billion
> Life expectancy: 82.7 years
> Gov’t debt as % of GDP: 46.1%
> Patent applications per 1 million people: 320.8

For the seventh consecutive year, Switzerland was rated the world’s most competitive economy.
Switzerland — like Singapore and the United States that round up the top three — performs very well in most competitiveness measures. The country’s infrastructure is rated better than that of any other country. As in Northern Europe and the United States, however, the quality of Switzerland’s infrastructure declined over the past year.

The country leads the world in several other measures as well, particularly innovation, which is assessed based on the presence of major research institutions and patent applications, among other factors. Switzerland trails only Britain and the United States in the average rating of top tier universities, and there are 320.8 patent applications per 1 million Swiss residents, far higher than in the vast majority of countries.

Click here to see the least competitive economies in the world.

The Least Competitive Economies

10. Myanmar
> 2014 GDP:
$241.98 billion
> Life expectancy: 65.1 years
> Gov’t debt as % of GDP: 39.7%
> Patent applications per 1 million people: 0.0

Myanmar, previously known as Burma, improved in its rating as a competitive global economy in the 2015 WEF report, moving up three slots, but it still ranks as one of the 10 worst economies in the world. The nation is in the midst of a civil war, fighting several bands of rebels near its Chinese border. Peace may be in sight, but the conflict has certainly done the country no favors as a global competitor.

Specifically, Myanmar has one of the least efficient markets in the world. Obtaining a loan in the country, for example, is extremely difficult, which is a severe hindrance to smooth business operations. The nation’s financial institutions are poorly regulated, and banks are among the least trustworthy and least stable in the world.

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9. Venezuela
> 2014 GDP:
$538.92 billion
> Life expectancy: 74.6 years
> Gov’t debt as % of GDP: 45.6%
> Patent applications per 1 million people: 0.3

Though it ranked slightly better than Haiti, Venezuela is one of two Latin American nations that are among the 10 least competitive in the world. Unlike Haiti, which is still primarily a factor-driven economy, relying on unskilled labor and natural resources, Venezuela is transitioning to an efficiency-driven economy, which means it is developing more efficient production processes and increasing product quality.

Despite the transition to a more sophisticated economy, the South American nation is rife with impediments to development. Though secondary educational enrollment in Venezuela is better than in most countries at 93%, the national education system’s quality is among the poorest in the world. The country’s problems do not stop with the school system. Venezuelan government institutions are among the most corrupt, unethical, inefficient, and secretive in the world.

8. Mozambique
> 2014 GDP:
$31.99 billion
> Life expectancy: 50.2 years
> Gov’t debt as % of GDP: 55.4%
> Patent applications per 1 million people: n/a

The largest drags on Mozambique’s economy are its inadequate access to finances, government protection for businesses, and poor physical infrastructure. While nations with stable, developed economies are able to borrow to fund public services and stimulate the economy, nations like Mozambique, where access to finance, inefficient bureaucracy, and corruption are major problems, are not. The Mozambique government has a budget deficit worth 8.4% of its GDP, one of the lowest government budget balances in the world. The government does not adequately protect its businesses, as laws that protect intellectual property are inefficient and public funds are often illegally diverted to private interests — in a word, the government is corrupt. A healthy population is often essential for sustainable growth and prosperity. Mozambique has among the most cases of Tuberculosis and HIV of any country, as well as relatively high infant mortality. Life expectancy is 50.2 years, far lower than the global average life expectancy.

7. Haiti
> 2014 GDP:
$18.31 billion
> Life expectancy: 63.1 years
> Gov’t debt as % of GDP: 26.7%
> Patent applications per 1 million people: 0.0

One of the most important features of a healthy economy — one that promotes long-term growth and a high standard of living for residents — is access to financing. In Haiti, the poorest country in the Western Hemisphere, access to financing is the most commonly reported hindrance to doing business. The stakes are relatively high for Haiti, especially as the country is in many ways still recovering from the 2010 earthquake, which killed hundreds of thousands of people and crippled the nation’s infrastructure. According to a recent World Bank report, foreign assistance to Haiti has declined from $1.5 billion to $500 million.

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6. Malawi
> 2014 GDP:
$13.73 billion
> Life expectancy: 55.2 years
> Gov’t debt as % of GDP: 62.0%
> Patent applications per 1 million people: 0.0

The southeast African nation of Malawi has one of the worst infrastructures in the world. For example, less than a third of the nation is currently using mobile phones. In the United States, in contrast, 98.4% of the population has a mobile phone subscription. While the nation’s road and rail quality appear to be passable, Malawi’s air transportation and port infrastructures are among the worst in the world. The level of technological development in the nation is also less than adequate. For example, just 5.8% of Malawi’s population has access to the Internet. A quality education system is important to developing a competitive workforce, and Malawi’s school system is weak at every level of education. Only a tiny fraction — 0.8% — of the population has a college education. Barely a third of the population has the equivalent of high school education.

5. Burundi
> 2014 GDP:
$8.38 billion
> Life expectancy: 54.1 years
> Gov’t debt as % of GDP: 30.5%
> Patent applications per 1 million people: 0.0

Sharing a border with Tanzania, Rwanda, and the Democratic Republic of the Congo, Burundi is one of the seven least competitive nations located in Africa. The country gained its independence from Belgium in 1962. Currently in the earliest stage of development, Burundi’s economy is heavily dependent on unskilled labor and natural resources.

Corruption, technological limitations, and health problems are all significant impediments to the nation’s development. Corporate ethics in Burundi ranks among the worst of all the nations examined in the WEF report. Furthermore, there are only about 31 mobile phone subscriptions per 100 Burundi residents, the smallest share of any nation examined. Most striking, however, is the nation’s low life expectancy. The average Burundi resident is not expected to live to be 55 years old, one of the lowest life expectancies in the world.

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4. Sierra Leone
> 2014 GDP:
$12.63 billion
> Life expectancy: 45.6 years
> Gov’t debt as % of GDP: 38.8%
> Patent applications per 1 million people: 0.0

The quality of health care in a given nation and the life expectancy of its residents can play an important role in the country’s economic success — and Sierra Leone does poorly by both measures. Life expectancy in the country is just 45.6 years, and 107.2 infants die per every 1,000 live births, each among the worst in the world. The ebola outbreak that swept through Sierra Leone and other parts of West Africa last year can partially explain some of these health statistics. More than 15,000 Sierra Leone residents had contracted the disease, and nearly 4,000 had died as of data released in September.

The nation’s health is just one obstacle the Sierra Leone economy faces. The nation’s road, port, and air transportation infrastructure are all among the worst in the world, as are the country’s telephone and electricity networks.

3. Mauritania
> 2014 GDP:
$15.53 billion
> Life expectancy: 61.5 years
> Gov’t debt as % of GDP: 59.1%
> Patent applications per 1 million people: 0.0

Formerly under French control, Mauritania has been an independent nation for only 55 years. Still in the early stages of development, Mauritania’s economy is heavily dependent on unskilled labor and natural resources. The nation’s most fundamental impediments to development include deficient transportation infrastructure and a poorly educated workforce. Of the countries examined in the report, only three had lower quality primary education and only a handful of nations had worse infrastructure than Mauritania.

While the nation is rife with problems that hinder development, the African nation ranks as the worst in several measures. Potential investors in the country may be deterred by Mauritania’s problem with corporate ethics, and inadequate protection of minority shareholder’s interests.

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2. Chad
> 2014 GDP:
$29.53 billion
> Life expectancy: 51.2 years
> Gov’t debt as % of GDP: 25.0%
> Patent applications per 1 million people: 0.0

Despite improving somewhat in its measures of competitiveness from last year, Chad remained the second least competitive country. It ranked poorly in nearly every measure. None of the residents have mobile broadband subscriptions, an important factor in business development. Chad is highly corrupt, which can be adverse to economic progress. The worse threats facing Chad’s economic competitiveness, however, are its poor infrastructure and health of its residents. Chad has no existing railroads, and less than 40% of residents have cell phones — one of the lowest rates in the world. Life expectancy in Chad is 51.2 years, more than 25 years less than the U.S. life expectancy. For every 1,000 live births in Chad, 88.5 infants do not survive, versus a U.S. infant mortality rate of 5.9 per every 1,000 live births.

1. Guinea
> 2014 GDP:
$14.97 billion
> Life expectancy: 56.1 years
> Gov’t debt as % of GDP: 37.4%
> Patent applications per 1 million people: 0.0

Home to about 11.4 million people, Guinea is the least competitive of the countries reviewed in the WEF report. Like nearly all of the struggling African nations, Guinea only became a sovereign nation in the mid 20th century. Many of Guinea’s biggest impediments to progress are due largely to its weak institutions. Corruption, policy instability, inefficient government, and government instability all pose significant impediments to economic prosperity. Perhaps most discouraging for Guinea’s future, however, is the state of its education system. No country in the report ranked worse for quality of education.

Guinea is one of three countries in Sub-Saharan Africa that was hit hardest by the ebola outbreak last year killing more than 2,500 as of September. This may partially explain why the report lists public health as among the most problematic factors in doing business in Guinea.

Click here to see the most competitive economies in the world.

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