BOFIT Viikkokatsaus / BOFIT Weekly 2018/43

The annual Global Competitiveness Report released last week included 140 countries. Russia’s ranking has risen slightly over the past decade. While it trailed wealthy Western countries, it was close to the top among former socialist countries.

The ranking combines 90 indicators, most of which have been developed by other institutions. Their purpose is to describe a country’s ability to succeed in global markets. The measures evaluate, for example, basic institutions, infrastructure, financial system, research, health and education.

In interpreting these results, it is important to note that not all indicators are adjusted to the size of the country. The size of the economy gets directly a 1/12 weighting and certain quality measures favour countries with large populations. For example, when counting the number of academic articles published and number of research institutes – even if quality is accounted for to some extent – large countries receive a high score rather easily. In this way, countries with large populations rank higher than they would if only the workings of their economies were evaluated as such.

According to the report, Russia’s relative strengths include, among other things, market size (6th), quality of research institutions (12th), efficiency of train services (15th), airport connectivity (18th), scientific publications (22nd) and the adoption of information technology (25th).

Russia’s weak areas include public health, financial system and institutions. Some of the biggest challenges from the competitiveness perspective are high labour tax rate (133rd), restrictions on the freedom of the press (121st), banks’ regulatory capital ratio (114th), public sector corruption (113th), weak protection of property rights (112th), impediments to imports due to local regulations (113th), complexity of tariffs (110th) and low quality of roads (104th).

China ranked 28th in this year’s report. Its strengths and weaknesses were similar to Russia’s. However, China substantially outscored Russia in infrastructure comparisons.