Portugal is 34th in global competitiveness ranking

  • ECO News
  • 28 November 2018

The global competitiveness ranking covers 140 economies, measuring their competitiveness level, looking at their institutions, policies and factors which determine productivity.

Portugal is the 34th most competitive economy in the world. The ranking compares 140 different countries and the calculations are based on 12 different pillars, which look at the performance of institutions, infrastructures, the innovation capacity and the business dynamism, also looking at the labour market and the ICT adoption rate. In terms of health and infrastructures Portugal is close to the best in the world in those categories, but in terms of macroeconomic stability and financial markets dimension, it falls down many steps.

The ranking is elaborated by the World Economic Forum, and it is included on their “The Global Competitiveness Report”, which changed its methodology this year when it comes to analysing competitiveness. The new classification now gathers 12 categories, part of 4 major groups: enabling environment, human capital, markets and innovation ecosystem. The following pillars are part of these groups: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, financial system, market size, business dynamism and innovation capability.

Portugal’s performance differs greatly in each of these indicators. In the infrastructures indicator, which is evaluating the “quality and extension of transport infrastructure” such as road, rail, water and air, and also utility infrastructures, Portugal has performed its best, coming in 19th amongst all other 140 countries, which was its best position in the ranking. But it is health which gives the country its highest score of 95/100.

On the other hand, macroeconomic stability and the market size are those which make our country look worst. To scout macroeconomic instability, the WEF captures the level of inflation and the sustainability of fiscal policy, looking at the public debt’s dynamics (this year, Portuguese public debt stood at 121% of GDP), and the country got to the 58th place on these accounts. The market size, or the size of the domestic and foreign markets to which a country’s firm have access, put Portugal in 52nd place.

In terms of innovation capability, which measures “the quantity and quality of formal research and development; the extent to which a country’s environment encourages collaboration, connectivity, creativity, diversity and confrontation across different visions and angles; and the capacity to turn ideas into new goods and services”, the country got its lowest score, with 53/100 points.

Each of these 12 indicators have other factors attached to them, and in some of those Portugal is even leading — as is the case of the incidence of terrorism, in which Portugal scored the highest (has it recorded no incidents of terrorism), coming first, together with 23 other countries. It also is sharing the podium in terms of electricity connection rates and inflation rates evolution.

It is also among the best in the world in terms of tax barriers to the commodities market, easiness in the recruitment of foreigners and regulatory frameworks for bankruptcy processes.

What do the leading economies have that we miss?

With a total score of 70.2 points, Portugal is above the average of the ranking, which is 60 points. But it still stands way behind the 5 top competitive economies: United States (85.6 points), Singapore (83.5 points), Germany (82.8 points), Switzerland (82.6 points) and Japan (82.5 points).

The United States appears in the top 3 on 7 out of 12 of the pillars, occupying the first place in terms of business dynamism “thanks to its vibrant entrepreneurial culture”, and also in the labour market and financial system given its “depth, breadth
and relative stability”. In terms of market size the country’s score is nearly perfect, at 99.2 points; however, China takes the lead in that indicator.

“All these factors contribute to vibrant innovation ecosystem, making it a super innovator”, the report also showed. Issues like the deterioration of security and high homicide rates as well as relatively low checks and balances, judicial independence and transparency are making this top economy lag behind the most advanced economies.

In the Asian continent, Singapore and Japan are the most competitive countries. In the first case, the “openness” of the market is contributing to Singapore’s classification, and the country is seen as a “global commerce hub”. Infrastructures also give a near perfect score to this country, although Japan is also leading in this area. Digital and physical infrastructures in Japan are “top notch”.

In Europe, it is Germany taking the lead in innovation capability (87.5), “driven by a strong performance on patents (5th, 100) and research publications (3rd, 100), by top-ranked research institutions (4th, 100), and by a very high degree of buyer sophistication (66.1, 5th), leading to firms constantly being challenged by their customers to innovate”, the report shows.

Innovators in Germany benefit from a “vibrant business sector ” which helps to bring “innovations to the market”. Its position at the ranking is also explained by the “stable macroeconomic environment and a healthy, well educated and highly-skilled population”.

Switzerland ranks 2nd in Europe, behind Germany, and 4th globally (82.6), being one of the world’s super innovators. It is home to large multinationals that are often leaders in the sector, as well as a dense SME network with a reputation for quality and innovation.