Threat of financial crisis has not gone away, WEF warns
Threat of financial crisis has not gone away, WEF warns
The WEF’s global competitiveness report — its annual ranking of the strength of 137 economies around the world — warns that 10 years on from the global financial crisis, “the prospects for a sustained economic recovery remain at risk due to a widespread failure on the part of leaders and policy-makers to put in place reforms necessary to underpin competitiveness and bring about much-needed increases in productivity.
“Levels of ‘soundness’ have yet to recover from the shock of 2007 and in some parts of the world are declining further. This is especially of concern given the important role the financial system will need to play in facilitating investment in innovation,” the WEF added.
The economies of the Middle East and North Africa improved their average performance in the first half of 2017, despite challenges mainly from the decline in energy prices. The most improved country in the region was Egypt, up 14 slots to 101 in the world.
“Low oil and gas prices are forcing the region to implement reforms to boost diversification, and heavy investments in digital and technological infrastructure have allowed major improvements in technological readiness. However, these have not yet led to an equally large turnaround in the region’s level of innovation,” the WEF said.
The UAE was again ranked top of the regional rankings, at 17th, down one slot from last year. Saudi Arabia was ranked 30th, also down one position.
Qatar fell by seven positions to 25th, though the WEF noted that the report was compiled before the economic effects of the economic sanctions introduced by some of its Gulf neighbors because of allegations of terrorism funding.
“The country will have to ensure better access to digital technologies for individuals and businesses, and further strengthen educational institutions,” the WEF said.
On Saudi Arabia, the report said: “The macroeconomic environment has improved slightly after the 2015 oil price shock, but financial market efficiency has deteriorated as interest rates increased in 2016 and credit growth slowed.
“The country has stable institutions, good-quality infrastructure, and the largest market in the Arab world. Saudi executives see restrictive labor regulations as their most problematic factor for doing business: The labor market is segmented among different population groups, and women remain largely excluded,” the WEF added.
Another concern is the lack of adequately educated workers. Although tertiary enrolment is strong at 63 percent, more efforts are needed to advance the quality of education and align it with economic needs, the report said.
The UAE “continues to lead the Arab World in terms of competitiveness, but it loses one place as other countries post even larger gains,” the WEF said.
“This improvement shows the resilience of the UAE economy, in part due to increased diversification, which is reflected in its stable macroeconomic environment and its ability to weather the double shock of lower oil and gas prices and reduced global trade,” the report added.
Although the International Monetary Fund (IMF) predicts gross domestic product (GDP) growth to drop to 1.3 percent this year, non-oil growth is expected to pick up, suggesting that the country’s diversification strategy is bearing fruit. To further increase its competitiveness, the UAE will have to speed up progress in terms of spreading the latest digital technologies and upgrading education.
For the ninth consecutive year, Switzerland — home of the WEF — was judged the most competitive economy in the world, narrowly ahead of the US and Singapore, which switched positions in second and third.
Another key finding of the report is that competitiveness is enhanced, not weakened, by combining degrees of flexibility within the labor force with adequate protection of workers’ rights.
“With vast numbers of jobs set to be disrupted as a result of automation and robotization, creating conditions that can withstand economic shock and support workers through transition periods will be vital,” the WEF said.
The data also suggests that the reason innovation often fails to ignite productivity is due to an imbalance between investments in technology and efforts to promote its adoption throughout the wider economy.
Klaus Schwab, WEF founder and executive chairman, said: “Global competitiveness will be more and more defined by the innovative capacity of a country. Talents will become increasingly more important than capital and therefore the world is moving from the age of capitalism into the age of talentism.”
US-China trade war to weigh on South Korean economy
- The South Korean economy is expected to grow 2.9 percent this year, lower than an earlier estimate of three percent
- The International Monetary Fund said this week the growing trade confrontation is the ‘greatest near-term threat to global growth’
SEOUL: South Korea’s finance minister warned that an all-out trade war between the US and China would have grim implications for the country, as he lowered this year’s growth outlook Wednesday.
The world’s 11th largest economy is expected to grow 2.9 percent this year, lower than an earlier estimate of three percent, Kim Dong-yeon said, citing slowing demand at home and abroad as well as rising unemployment.
The latest estimate is also lower than last year’s figures, when the export-reliant economy expanded 3.1 percent, and comes as the South’s top two trading partners China and the US engage in a bitter spat that has seen them impose hefty tariffs on billions of dollars in goods.
“The economic situation down the road does not seem to be bright,” Kim told reporters.
“The situation may get worse if anxiety in the international financial markets spreads due to the US-China trade dispute... and market and corporate sentiment does not improve,” he said.
Overseas shipments account for more than half of the South’s economy, with more than a quarter of exports shipped to China and about 12 percent to the US.
Kim vowed to “closely monitor international trade situations including the US-China trade row” and announced measures to encourage job creation and spur domestic spending.
US President Donald Trump has taken a confrontational “America First” stance on trade policy, imposing steep tariffs on steel and aluminum, which angered allies and prompted swift retaliation, as well as 25 percent duties on $34 billion of Chinese goods, with more on the way.
China has matched US tariffs dollar-for-dollar and threatened to take further measures, while US exports face retaliatory border taxes from Canada, Mexico and the European Union.
The International Monetary Fund said this week the growing trade confrontation is the “greatest near-term threat to global growth” and in the worst case could cut a half point off world GDP.