Singapore slips a notch to 3rd most competitive economy

Singapore dipped to third in the World Economic Forum (WEF) rankings while the United States moved up a step to take second place.
Singapore dipped to third in the World Economic Forum (WEF) rankings while the United States moved up a step to take second place.PHOTO: ST FILE

Singapore has slipped from its place as the world's second-most competitive economy - a spot it has occupied since 2010.

The country has dipped to third in the World Economic Forum (WEF) rankings while the United States has moved up a step to take second place.

Switzerland remains in first place, its fifth year in a row.

The WEF report assesses 12 factors that drive long-term growth and prosperity, including infrastructure, macroeconomic environment, labour market efficiency, health and primary education, to rank 137 countries.

The ranking also takes into account a survey of business leaders that captures the appetite for entrepreneurship, the extent of the skills gap, and the incidence of corruption in each economy.

Singapore's slip in the league table need not cause too much concern, according to experts approached by The Straits Times.

The WEF said the decline was mainly on account of a "persisting deflationary spell", which it assessed to have resulted in a slightly weaker macroeconomic environment. Singapore was ranked 18th for macroeconomic environment.

In fact, inflation here has been back in positive territory for all of this year.

"Why are they so delayed in their understanding of our price conditions?" said UOB economist Francis Tan. "We are not in deflation; not for headline or for the core inflation measure."

Strictly speaking, Singapore's long bout of falling prices was also partly an administrative decision to control car and property values. Unlike deflation, it reflected no wider economic malaise.

The WEF did note that despite dropping one rank, Singapore still "posts a stable and very strong performance across the board".

Of more significance was the report's observation that "Singapore continues to lag behind the world's most prolific innovation powerhouses". This verdict came despite the Government's wide-ranging campaigns to boost innovation and business sophistication.

DBS economist Irvin Seah said: "Although we shouldn't get overly concerned by a drop of one notch, it's worth having a second look at some of our existing policies if we want to transit into an innovation economy.

"For example, we may have to re-look our education system to encourage more creative thinking."

Singapore also fell in the health and primary education rankings, down from first place to third.

Mr Seah said: "Regardless of the rankings, we need to put in more effort. We have been talking about this for many years but we still have not been able to build a pool of global players."

Maybank Kim Eng economist Chua Hak Bin was optimistic that Singapore's Smart Nation drive would help it rise in the "technological readiness" rankings. He added: "Other areas for improvement include increasing the female labour participation rate (ranked 73)."

A version of this article appeared in the print edition of The Straits Times on September 27, 2017, with the headline 'S'pore slips a notch to 3rd most competitive economy'. Print Edition | Subscribe