The Global Competitiveness Index 2011–2012: Setting the Foundations for Strong Productivity
XAVIER SALA-I-MARTINBEÑ AT BILBAO-OSORIO JENNIFER BLANKE MARGARETA DRZENIEK HANOUZTHIERRY GEIGER
World Economic Forum
The Global Competitiveness Report 2011–2012
is coming out at a time of re-emerging uncertainty in the global economy. At the beginning of the year, worldwide recovery appeared fairly certain, with economic growth for 2011 and 2012 projected by the International Monetary Fund (IMF) at 4.3 percent and 4.5 percent,respectively. However, the middle of the year saw uncertainties regarding the future economic outlook-emerge, as growth figures for many economies had to be adjusted downward and the political wrangling inthe United States and Europe undermined confidence in the ability of governments to take the necessary steps to restore growth.Recent developments reinforce the observation that economic growth is unequally distributed and highlight the shift of balance of economic activity. Onthe one hand, emerging markets and developing econo-mies, particularly in Asia, have seen relatively strong economic growth—estimated at 6.6 and 6.4 percent for 2011 and 2012, respectively, and attracting increasing financial flows. On the other hand, the United States, Japan, and Europe are experiencing slow and deceler-ating growth with persistent high unemployment and continued financial vulnerability, particularly in some European economies. GDP growth rates for advanced e conomies in 2011 are expected to remain at levels that,for most countries, are not strong enough to reduce the unemployment built up during the recession.In this context, policymakers across all regions are facing difficult economic management challenges. After closing the output gap and reducing the excess capacity generated during the crisis, emerging and developing countries are benefitting from buoyant internal demand,although they are now facing inflationary pressures caused by rising commodity prices. In advanced economies,the devastating earthquake in Japan and doubts about the sustainability of public debt in Europe, the United States, and Japan—issues that could further burden the still-fragile banking sectors in these countries—are undermining investor and business confidence and casting a shadow of uncertainty over the short-term economic outlook. Particularly worrisome is the situ-ation in some peripheral economies of the euro zone,where—in spite of the adoption of recovery plans— high public deficit and debt levels, coupled with anemic growth, have led to an increased vulnerability of the economy and much distress in financial markets, as fear sof default continue to spread. This complex situation in turn encumbers the fiscal consolidation that will reduce debt burdens to the more manageable levels necessary to support longer-term economic performance.