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U.K., Germany, France Competitiveness Slips, WEF Says (Update1)
Sept. 28 (Bloomberg) -- The competitiveness of Europe's largest economies sagged this year, even as Finland remained the most productive and efficient country in the world, according to an annual report by the World Economic Forum.
In the rankings of competitiveness in 117 economies, the U.K. slipped two places to 13th, Germany dropped two to 15th, Spain tumbled six to 29th, France fell three to 30th and Italy remained at 47th, one place above Botswana. Finland, the U.S. and Sweden stayed the three most competitive economies.
The Geneva-based forum's report released today may fan speculation within the European Central Bank and Organization for Economic Cooperation and Development that the potential or non- inflationary growth rate of the 12-nation euro economy is declining, diminishing the prospects for economic expansion.
"Potential growth in Europe has become noticeably weaker,'' said Ed Teather, an economist at UBS AG in London. "There has been collapse in investment growth and oil prices have become very high. Both are damaging the potential of the euro area to grow without setting off inflation. ''
The forum, funded by more than 1,000 corporations including ABB Ltd., Siemens AG and Merrill Lynch & Co., has published competitiveness reports since 1979. The rankings combine economic data and a survey of chief executives across the globe sharing their views on the countries' business environment.
Finnish Innovation
Finland, home to Nokia Oyj, the world's largest mobile-phone maker, was praised in the report for an "innovative business environment'' and "very healthy macroeconomic environment.'' The U.S.'s "continued technological supremacy'' supported its runner- up status, the study said.
Below Sweden, Denmark moved to fourth, swapping places with Taiwan. Singapore, Iceland, Switzerland, Norway and Australia completed the top 10.
In Europe, Germany's ranking would have been higher were it not for concern among executives about its economic growth outlook and its large budget deficit, the forum said. Italy's performance reflects deteriorating public finances and a weak technological base, it said.
The weakening in competitiveness in Europe's biggest economies comes two months after the Paris-based OECD warned the region's ability to grow without sparking inflation was fading. It calculated that the region's potential growth rate will soon drop from 2 percent because of a declining population and increased retirements.
"A more competitive economy is one that is likely to grow faster,'' Augusto Lopez-Claros, chief economist of the World Economic Forum, said in the report. "Productivity is the key driver of the rates of return on investment which, in turn, determine the aggregate growth rates of the economy.''
'Emergency'
Lorenzo Bini Smaghi, a member of the ECB's six-member executive board, said July 8 that Europe's growth potential may have fallen to as low as 1 percent. "The euro zone is in a state of emergency,'' he said.
Not every European economy became less competitive in the last year. Denmark, the Netherlands, Portugal and Ireland each gained, the report showed. Estonia held the 20th position, proving more competitive than the nine other nations which recently joined the European Union.
South Korea posted the biggest jump, advancing to 17th from 29th. Elsewhere in Asia, Singapore rose one place to sixth, Japan fell three positions to 12th, China dropped three slots to 49th and India advanced five places to 50th.
Morocco had the biggest decline, falling 20 places to 76th. Chile, at 23rd, remained the most competitive Latin American economy. Mexico and Brazil fell amid political uncertainties. South Africa was the most competitive African economy at 42nd.
