Less open, lower growth

Less open societies tend to fall behind economically, the World Economic Forum (WEF) said in a new report, underscoring that a global trend toward protectionist economic policies risked undermining nations' ability to grow and innovate.

"Declining openness in the global economy is harming competitiveness and making it harder for leaders to drive sustainable, inclusive growth," said Klaus Schwab, WEF founder and executive chairman, as he released the organization's Global Competitiveness Report on Wednesday.

The Geneva-based forum's report is an annual survey of factors driving productivity and prosperity in 138 countries. In the current report, WEF said there had been a trend emerging over the past ten years showing that many countries are less open to free trade in goods and services. This trend was marked by a global rise in non-tariff barriers, burdensome customs procedures and tougher rules governing foreign direct investment (FDI) and foreign ownership.

The report also looks at monetary policy measures such as bond-buying programs and ultra-low interest rates adopted by central banks over the past decade, saying they were less effective in fuelling growth in countries with state interventionist policies.

Global Competitiveness Index

The report is based on WEF's Executive Opinion Survey, a poll conducted among more than 10,000 business leaders from all over the world who give their opinions on a range of socio-economic issues such as institutions, infrastructure, labor market, education, just to name a few. 

Their views of countries also form the database for WEF's Global Competitiveness Index (GCI), which ranks the most competitive economies in the world.

As in the previous year, Switzerland is top of the tables in 2016, too, narrowly beating Singapore and the United States, which occupy the second and third places respectively. Following them is the Netherlands and Germany, which have swapped places over the year.

The next two countries, Sweden and the United Kingdom, both advanced three places, with the latter's GCI score being based on pre-Brexit data. The remaining three economies in the top ten are Japan, in 8th place, followed by Hong Kong and Finland.

Emerging economies converging

Regarding the world's largest emerging economies, also known as BRICS, the WEF report states "a sign of convergence in the competitiveness." While China leads the group, ranking in 28th place, India made big strides again, surging 16 places to 39. With both Russia and South Africa moving up two places to 43 and 47 respectively, only Brazil was declining, falling six places to 81.

Other emerging market economies, notably in the East Asia and Pacific region, saw reversals in the GCI scores this year, ending improvements reached over the past few years. Malaysia has dropped out of the top 20, Thailand falls two places to 34, while the Philippines drops even ten places to 57.

More winners and losers

The drop in the price of oil has highlighted the urgency of the need to advance competitiveness in the Arab world, the WEF report says. All energy-exporting nations, it adds, have "a clear need to further diversify their economies" to make them more competitive.

A rare case of an African nation drastically boosting its competitiveness is Rwanda. The country in sub-Saharan Africa has risen six places, coming in at 52. Thanks to market-friendly policies, it is closing in on the region's leaders Mauritius and South Africa, leaving even Kenya and Nigeria behind.