South Korea's National Competitiveness Falls 4 Steps to 27th Place... Fiscal Deterioration and Decline in Entrepreneurial Spirit

IMD National Competitiveness Index Evaluation Results
Decline in Economic Performance Excluding Infrastructure, Government Efficiency, and Corporate Efficiency

[Asia Economy Sejong=Reporter Kwon Haeyoung] South Korea's ranking in the Swiss International Institute for Management Development (IMD) World Competitiveness Ranking fell by 4 places from last year to 27th. This is the lowest ranking in four years since 2018 (27th). In particular, the economic performance category dropped by as much as 4 places, with the domestic economy sector?previously praised by the former government for holding up well during the COVID-19 crisis?slipping by 7 places. Competitiveness in the fiscal sector of government efficiency also fell by 6 places, and regulatory tightening and restrictions on corporate activities implemented by the previous administration significantly stifled corporate decision-making and entrepreneurship.

According to the Ministry of Economy and Finance on the 15th, South Korea was ranked 27th in the IMD World Competitiveness Ranking. IMD evaluates and ranks countries based on four categories: economic performance, government efficiency, business efficiency, and infrastructure.

South Korea's competitiveness ranking rose to 23rd in both 2020 and 2021 but dropped to 27th this year after just one year. This year, only infrastructure improved by one place (from 17th to 16th), while all other categories declined.

First, in the economic performance category, domestic economy, international investment, and employment showed weakness, resulting in a ranking of 22nd, down 4 places from 18th last year. International trade improved by 3 places (33rd to 30th), and inflation rose by 2 places (51st to 49th), but domestic economy fell by 7 places (5th to 12th), international investment dropped by 3 places (34th to 37th), and employment slipped by 1 place (5th to 6th). Notably, the domestic economy indicators, which had entered the top 10 last year, saw the real Gross Domestic Product (GDP) growth rate and per capita GDP growth rate rankings plunge to 45th and 41st respectively this year, a drop of more than 30 places.

A Ministry of Economy and Finance official explained, "The domestic economy category experienced a significant ranking drop due to a rebound effect following the high rankings recorded last year, despite improvements in macroeconomic indicators."

Government efficiency also declined by 2 places from 34th to 36th, contributing to the overall ranking drop. The business environment category improved by 1 place (49th to 48th), but fiscal competitiveness fell by 6 places (26th to 32nd), tax policy by 1 place (25th to 26th), institutional framework by 1 place (30th to 31st), and social conditions by 2 places (33rd to 35th). Among these, fiscal competitiveness saw the largest decline, with future pension funding dropping 15 places (35th to 50th). The fiscal deficit ratio relative to GDP (6th to 9th) and government expenditure ratio (15th to 18th) each fell by 3 places.

Business efficiency also dropped significantly by 6 places from 27th to 33rd, pulling down the overall ranking. The financial market ranking remained unchanged at 23rd, but productivity fell by 5 places (31st to 36th), labor market by 5 places (37th to 42nd), management practices by 8 places (30th to 38th), and attitudes and values by 2 places (21st to 23rd). Specifically, in the labor market, the priority given to talent attraction dropped 12 places (6th to 18th). In management practices, the speed of corporate response to opportunities and crises fell 15 places (20th to 35th), and the sharing of entrepreneurial spirit dropped 15 places (35th to 50th), indicating a significant contraction in corporate decision-making and entrepreneurship.

Infrastructure improved by 1 place from 17th to 16th. Technological infrastructure fell by 2 places (17th to 19th), scientific infrastructure and health & environment each dropped by 1 place (2nd to 3rd and 30th to 31st respectively), but basic infrastructure (18th to 16th) and education (30th to 29th) improved.

A Ministry of Economy and Finance official stated, "Through the new government's economic policy direction, we will vigorously pursue structural reforms in five major sectors?public, labor, education, finance, and services?and efforts to enhance private sector vitality to improve national competitiveness."

This content was produced with the assistance of AI translation services.