Australia second on economy ladder: survey

May 14 07:03 AFP

The United States and Finland have the most competitive economies in the world, according to the 2003 World Competitiveness Yearbook released by the Swiss business school IMD on Wednesday.

Both countries topped the new split annual rankings of national business and economic efficiency despite restructuring affecting their traditional strengths, the information technology and finance industries, IMD said in its report.

The IMD's ranking has been split into two for the first time, separating economies with over 20 million inhabitants from smaller countries.

The competitiveness ranking of large economies places the United States ahead of Australia, Canada, Malaysia, Germany and Taiwan respectively.

Finland, Singapore, Denmark, Hong Kong, Switzerland and Luxembourg head the list of 29 smaller economies.

Australia, Malaysia, Singapore and Hong Kong improved their efficiency over the past year, but the SARS outbreak was expected to have "dire consequences" for Asian competiveness in next year's ranking, IMD warned.

The United States maintained its top slot thanks to interest rate cuts and consumer spending.

But report also warned that the US current account deficit, its expected budget deficit and the Bush administration's proposed tax cuts could increase foreign debt and lead to a further weakening of the dollar in 2003. advertisement advertisement

"As a consequence, it will be harder for developing nations to raise capital because the US economy would drain most of the world's financial resources," competitiveness director Stephane Garelli of IMD said.

"Two time bombs are ticking," he added, warning that global corporate debt was at an all-time high and pension funds were losing 2.8 trillion dollars worth of assets and were in need of "significant refinancing by enterprises and states".

Major European economies are battling with deficits, overregulation and government reform, with Germany (5th), Britain (7th) and France (8th) afflicted by structural problems weighing on their competitiveness, IMD said.

"Some fresh air could come from the next wave of EU member states which show solid economic growth," Mr Garelli said.

Latin America is in need of "stability and predictability" following economic collapse in Argentina and Venezuela, according to Mr Garelli.

However, he praised recently-elected Brazilian president Luiz Inacio Lula da Silva for bringing "a very pragmatic administration".

Eight regions have also been integrated into the rankings, which assess various criteria for business efficiency, government efficiency and regulation, infrastructure and economic performance.

Sao Paulo state in 13th position of the large economies is rated as more competitive than its home country Brazil (21st), and Zhejiang province on China in 14th place ranks just below mainland China (12th).

The Ile de France region, including Paris, is the most competitive European region among the smaller economies (15th).

IMD reveals that only four of the 59 countries and regions in its annual ranking of business and economic efficiency saw their Gross Domestic Product (GDP) shrink in 2003.

"The good news is that the world economy is not in recession. The bad news is that no one realises it," Mr Garelli commented.