IMD World Competitiveness Ranking: Denmark First, and Croatia Experienced the Largest Growth in All Factors

Due to increasing inflationary pressures and geopolitical conflicts, napori to limit the impact of companies on the environment could be halted, according to this year’s  IMD World Competitiveness Ranking for 2022, which sees Denmark taking the lead for the first time.

Inflationary pressures, it is explained in the statement, have a greater impact on businesses than concerns about greenhouse gas emissions and socio-economic disparities, which affects the competitiveness of national economies.

– It has been shown that inflationary pressures affect most of the economies studied. Other global challenges affecting the competitiveness of countries include COVID-19 variants appearing with varying intensity regarding the number of infections worldwide; different national policies for dealing with COVID (from ‘zero tolerance COVID’ policies to distancing from the COVID topic); and Russia’s invasion of Ukraine – said Christos Cabolis, chief economist at the World Competitiveness Center (WCC).

Denmark ranks first for the first time in the 34-year history of the ranking, after being in 3rd place in 2021. It had outstanding results in business efficiency factors and productivity and efficiency, while in the management practice sub-factor, Switzerland fell to 2nd place, while Singapore returned to 3rd place.

– Denmark is the most digitally advanced country in the world and now ranks first thanks to good policies, advantages as a European country, a clear focus on sustainability, and the encouragement of its agile business sector – said Professor Arturo Bris, director of the World Competitiveness Centre (WCC).

Significant Growth for Croatia

Croatia experienced the largest growth this year, moving from 59th to 46th place, advancing in all competitiveness factors. This could be linked to improved business sentiment due to the country’s upcoming accession to the euro area, highlighted by the WCR.

– We are pleased with Croatia’s exceptional growth in the World Competitiveness Ranking (WCR), from 59th to 46th place this year. After two pandemic years and two devastating earthquakes, such growth is encouraging and shows the exceptional resilience of the Croatian economy. The expected benefits of entering the euro area, the Schengen area, and the process of joining the OECD have contributed to the positive changes in the Croatian economy recorded by the World Competitiveness Ranking – emphasized Ivan Mišetić, acting president of the National Council for Competitiveness.

There is no significant increase for Western Europe and North America, but Eastern Europe is experiencing a rise in competitiveness, with the average competitiveness position rising to 40th place (two points higher than in 2021).

Inflationary Pressures Intensify Problems 

Inflation data calculated for this ranking included consumer price inflation taken from the IMF’s World Economic Outlook for the period 2021 – which records only two economies with negative inflation – and inflation forecasts from the same source, which no longer recorded negative inflation anywhere.

– These results are in stark contrast to the data we assessed in recent years. It is clear that inflationary pressure is now exacerbating already problematic bottlenecks in the supply chain worldwide – added Cabolis.

Moreover, executives themselves now believe that inflationary pressures, geopolitical conflicts, and supply chain bottlenecks affect their business more than regulations on greenhouse gas emissions and socio-economic inequalities.

– This short-term reshuffling of priorities may lead to neglecting long-term trends, such as those related to environmental sustainability, which could have serious global implications – said José Caballero, senior economist at WCC.

The percentages of executives who cited each of these challenges as a reason for 'serious concern' were: inflationary pressures, 50 percent; geopolitical conflicts, 49 percent; and supply chain bottlenecks, 48 percent. The possibility of prolonged COVID-19 presence ranked fourth (43 percent of executives placed it first). Respondents could select up to 3 options from ten provided.

Less than 15 percent of surveyed executives believe that greenhouse gas emission regulations have affected business in 2022. This is in direct contrast to the perceptions executives had a year ago when most, especially in the most competitive countries, cited environmental sustainability as one of the top three reasons for concern.

Smaller Economies Continue to Dominate 

In the top 10, Sweden fell to 4th place (from 2nd). This is the result of slowing economic performance measures such as domestic economy (15th from 10th), international trade, and employment sub-factors. Then, Hong Kong rose to 5th (from 7th), which has its roots mainly in economic performance, especially in the domestic economy sub-factor and to a lesser extent in international investments.

The Netherlands lost two places, falling to 6th place (from 4th) due to a significant decline in economic performance, while Taiwan advanced one place (7th from 8th).

Finland entered the top 10 for the first time since 2009, reaching 8th position (from 11th), despite a decline in economic performance factors, thanks to progress in government efficiency, particularly in tax policy, institutional framework, business legislation, and social framework.

Switzerland’s performance remained strong despite a slight decline in the overall ranking. It was at the top in government efficiency and infrastructure factors, and 4th in business efficiency. Singapore’s recovery stemmed from strong improvements in the domestic economy (1st from 15th), employment (3rd from 18th), public finances (6th from 12th), and productivity and efficiency (9th from 14th). However, it remained at relatively low positions in several sub-factors, including management practices (14th), scientific infrastructure (16th), and health and environment (25th).

The decline of Norway, which fell from 6th to 9th place, is the result of declines in three of the four competitiveness factors. Although it remains 25th in the economic performance factor, its performance has declined in the domestic economy sub-factor (28th), as well as in the sub-factors of international investments (22nd), employment (18th), and prices (44th).

The USA remained in 10th place, despite some significant declines at the sub-factor level. For example, its performance in international trade (41st), institutional framework (23rd), management practices (15th), and technological infrastructure (11th) worsened. The country’s ranking in other sub-factors remained low, such as public finances (53rd), social framework (40th), and attitudes and values (26th). It compensated for this by achieving first place in international investments (from 2nd to 1st) and remaining in 1st place in scientific infrastructure. It also improved in employment (10th) and labor market (23rd) sub-factors.