Hungary and Poland head in different directions in Global Competitiveness Index

Hungary and Poland head in different directions in Global Competitiveness Index
By bne IntelliNews September 28, 2016

Estonia and the Czech Republic top the Central & Eastern European chart in the Global Competitiveness Index (GCI) 2016-2017. While Hungary slumped to the bottom of the pile with the largest slide in the region, Poland surged up the table, according to the World Economic Forum (WEF) report released on September 28.

Switzerland maintained its role as global leader in the survey, which rates competitiveness on a scale of 1-7, for an eighth year with a score of 5.8. The Alpine state was followed by Singapore, and then the US. Yemen propped up the list of 138 countries with 2.7.

The 2016-17 report warns that “declining openness is threatening growth and prosperity… [while] monetary stimulus measures such as quantitative easing are not enough to sustain growth and must be accompanied by competitiveness reforms.”

Estonia and the Czech Republic lead CEE, but at 30th and 31st still rank behind the likes of China and Saudi Arabia. Surprisingly for a supposed e-economy pioneer, one of Estonia’s weakest points remains innovation, although that did not prevent the country maintaining its ranking from the previous year.

The healthcare and macro environment pillars were Estonia’s strongest, a profile closely shadowed by Czechia. Bureaucracy and corruption remain the latter’s weakest points, although the Czechs scored the joint highest for institutions in CEE if the Baltic states are left to one side.

Latvia dropped five places to finish at 49th in the latest report. Like many of its peers, its innovation and business sophistication dragged on the headline score. Lithuania is headed the other way, rising one spot to 35th. While the country’s profile was generally in line with its peers, its tax system took a bashing.

Critics of the statist economic policies of Law & Justice (PiS) since it took power in November will be surprised to find that Poland jumped five places to 36th in the latest WEF report. As across the region, innovation and business sophistication remain weak

Tax and labour market regulations are also viewed as persistent issues for Poland. Institutions and infrastructure lag the standards of many peers, but the latter has shown significant improvement. Improvements in financial market development and in the contribution of macroeconomic growth to the overall size of the market helped buoy the gain in the ranking.

Slovakia was the only state to match Czechia’s score of 4.2 on the institutional pillar. Alongside a push to 5.9 for its macro environment, that saw the country move two places higher in the table to 65th.

Hungary slumped six places this year to 69th, weighed down by institutional weakness, poor education standards and a lack of innovation. The sharpest slider in CEE was Hungary, which scored a new record low of 4.2 points in the survey, to leave it at 25th spot. Croatia sits in 74th place, Cyprus was 83rd, and Greece came in bottom at 84th.

Institutional weakness did most to drag down Hungary’s score. A lack of transparency in government policymaking and the subsequent advantage handed to “privileged businesses” are noted. Abuse of property rights and corporate governance are other weaknesses.