Korea's Competitiveness Surpassed by Bahrain and Malaysia... Ranked 28th, Down from Last Year

IMD National Competitiveness Ranking Results Show
'Government Efficiency' Ranked 38th
Ministry of Economy and Finance: "We Will Enhance Government Efficiency Through Efforts Like Legislating Fiscal Rules for Sound Finance"

[Image source=Yonhap News]

South Korea's national competitiveness ranking this year fell one place to 28th compared to last year (27th). The ranking was pulled down due to worsening government fiscal conditions, including an increase in fiscal deficit and rising debt relative to gross domestic product (GDP).

On the 20th, the Ministry of Economy and Finance announced that South Korea ranked 28th among 64 countries evaluated in the "2023 IMD World Competitiveness Yearbook" published by the International Institute for Management Development (IMD) in Switzerland.

In the IMD evaluation, South Korea's national competitiveness ranking dropped one more place after falling four places last year for the first time in four years (from 23rd in 2021 to 27th in 2022). Energy-exporting countries such as Qatar (18th in 2022 → 12th in 2023), Saudi Arabia (24th in 2022 → 17th in 2023), Bahrain (30th in 2022 → 25th in 2023), and Malaysia (32nd in 2022 → 27th in 2023) saw significant rises in their rankings, surpassing South Korea.

Among the seven countries in the "30-50 Club" (countries with per capita income over $30,000 and population over 50 million), South Korea ranked higher than the United Kingdom (23rd in 2022 → 29th in 2023), France (28th in 2022 → 33rd in 2023), and Japan (34th in 2022 → 35th in 2023), but remained third behind the United States (10th in 2022 → 9th in 2023) and Germany (15th in 2022 → 22nd in 2023). The sharp fluctuations in global energy supply prices influenced these ranking changes. Except for the United States, most 30-50 Club countries are major energy importers. South Korea maintained its 9th place among countries with populations over 20 million (27 countries), unchanged from the previous year.

Since 1989, the IMD national competitiveness ranking has evaluated 20 subcategories across four areas: economic performance, government efficiency, business efficiency, and infrastructure. Rankings are based on quantitative indicators from the previous year and separate survey results. The number of countries surveyed changes annually.

'Government Efficiency' Drops from 36th to 38th... Rapid Debt Increase Pulls Down Fiscal Competitiveness

This year, the ranking for 'government efficiency' fell from 36th to 38th. Government efficiency is evaluated across five detailed areas: fiscal policy, tax policy, institutional framework, business environment, and social environment. Among these, the fiscal sector ranking dropped sharply from 32nd to 40th. The real increase rate of general government debt plummeted from 34th to 56th, and the fiscal balance ratio to GDP (9th → 24th) and general government debt to GDP (22nd → 29th) also declined.

The Ministry of Economy and Finance explained, "The worsening fiscal balance and rising national debt had an impact." According to the ministry, the national debt ratio to GDP, which was 35.9% in 2018, rose rapidly to 37.6% in 2019, 43.6% in 2020, 46.9% in 2021, and 49.6% in 2022. The ministry added, "The 'real increase rate of debt' category reflects the rapidly rising national debt ratio to GDP since 2018. Since our government has decided to suppress budget growth as much as possible, negative evaluations in this area are expected to improve going forward." Exchange rate volatility in the second half of 2022 due to global monetary tightening also dropped sharply (3rd → 45th), pulling down the institutional framework ranking (31st → 33rd).

'Economic Performance' Ranking Shows Strong Results... Ministry of Economy and Finance: "We Will Enhance Government Efficiency Through Sound Fiscal Efforts"

However, the 'economic performance' ranking rose significantly from 22nd to 14th. Economic performance is evaluated across five subcategories: domestic economy, international trade, international investment, employment, and inflation. Except for international trade (30th → 42nd), all other subcategories improved: domestic economy (12th → 11th), international investment (37th → 32nd), employment (6th → 4th), and inflation (49th → 41st), achieving the highest rankings. The ministry stated, "Except for the drop in international trade ranking due to a surge in energy imports and a sharp decline in semiconductor exports leading to increased trade deficits last year, all other areas performed well."

In the business efficiency sector, the ranking remained unchanged at 33rd, but the financial sector within it fell significantly from 23rd to 36th. The ministry explained, "This reflects not so much the competitiveness of finance itself but rather the domestic stock market decline in 2022 and financial market instability in the second half of the year." The infrastructure sector maintained its 16th place, unchanged from the previous year.

The Ministry of Economy and Finance said, "The area where we feel the most concern is government efficiency. Since 2017 and 2018, the ranking in this area has been continuously declining, and this year the gap with the overall ranking widened to seven places." It added, "Taking this evaluation as an opportunity, the government plans to improve government efficiency through efforts such as legislating fiscal rules and accelerating public innovation, while also intensifying policy efforts to improve the overall economic structure and productivity through the three major structural reforms and regulatory reforms."

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