National competitiveness falls for two consecutive years

Korea's national competitiveness ranking fell to 28th, a decline for two consecutive years. Korea fell eight notches in the financial sector due to an increased fiscal deficit and national debt. Also, it saw a plunge in the financial sector by 13 notches due to instability in the capital market, including insolvency in real estate project financing (PF). Many say they see red flags on the fundamentals of a country's economy: fiscal soundness and financial stability.

According to the results of the IMD World Competitiveness Rankings this year announced on Tuesday (local time) by the Swiss International Graduate School of Management Development (IMD), Korea ranked 28th out of 64 countries. In the 2022 evaluation, it fell four places from the previous year to the 27th; this year, it fell one more place. Since 1989, the IMD has evaluated and ranked 20 sectors in four areas: economic performance, government efficiency, corporate efficiency, and infrastructure.

Deteriorating fiscal soundness had a significant impact on the decline in national competitiveness. The fiscal sector ranking fell from 32nd last year to 40th. In particular, as the fiscal deficit increased, the ranking in the fiscal balance to the gross domestic product (GDP) sector slipped 15 places to 24th. Last year's combined fiscal balance to GDP ratio was -3.3% (based on the 2nd supplementary budget), a dramatic drop from the previous year (-1.5%). The government efficiency ranking, which includes fiscal soundness, fell two places to 38th. An official from the Ministry of Strategy and Finance said, "The continued downtrend of government efficiency in the fiscal sector is leading the decline in national competitiveness rankings."

Finance also undermined national competitiveness. This year's ranking in the financial sector was 36th, down 13 places from last year. It is believed that the uncertainty in the money market that appeared in the second half of last year was reflected. Last year, domestic stock prices fell 25%, demonstrating greater volatility than major countries. Nevertheless, it ranked 14th in the economic performance category, which evaluates the country's annual economic performance. It rose eight places from a year ago and changed the highest ranking ever.

Denmark took first place in the overall ranking this year following last year. Ireland jumped up nine places to take second place, followed by Switzerland, Singapore, and the Netherlands.


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