The IMD World Competitiveness Ranking lists 64 countries worldwide, analysing factors such as economic performance, government efficiency, business efficiency and infrastructure.
Luxembourg ranked 12th in the 2021 edition of the survey, published on Thursday, reclaiming its 2019 spot after losing three places in the 2020 report, when it came 15th.
“Luxembourg is once again close to the top 10 most competitive countries. The strengths and weaknesses have changed little compared to last year, but in view of the current economic situation, they have a different significance,” the Chamber of Commerce said in a statement about the result.
“The economic and demographic dynamics, the solidity of public finances, a world-class finance centre, and the strong integration of Luxembourg in international trade are all assets that have enabled the Luxembourg economy to limit the negative effects of the crisis over the last 12 months,” it said.
The grand duchy ranked high for public finances, business legislation, international trade, productivity and efficiency, and basic infrastructure, among other criteria. However, it performed poorly on prices, tax policy, technological and scientific infrastructure, and international investment.
Western European countries led this year’s ranking. Switzerland rose two places to reach the top of the ranking for the first time. Sweden climbed six places compared to 2020 to land in second place, followed by the Netherlands.
“Although Switzerland was slow to fight the pandemic, it has not jeopardized its future economic growth because it has kept a disciplined financial strategy by not spending too much,” said Arturo Bris, director of the IMD World Competitiveness Center.
European economies weathered the crisis better than most other regions, the centre said in a statement, saying economies that invested in innovation, digitalisation, welfare benefits and social cohesion ranked higher this year.
Singapore, which stood at number one for two consecutive years, slipped to fifth place.
The Chamber of Commerce warned, however, that Luxembourg’s return to form could be short-lived.
“While the Luxembourg economy has withstood the crisis relatively better than others, earning it 10th place for the ‘economic performance’ pillar and 8th place for real GDP growth, the year 2021 is a period of uncertainty regarding the extent of the economic recovery, the consequences for businesses of the gradual withdrawal of aid and the situation within the major global economic blocs” it said.
Inflation, unemployment, international investment and the evolution of stock markets are risk factors, the chamber said. A lack of technological specialisation and research and development funding could further hamper competitiveness in future, it said.
Looking to consolidate the 2021 ranking, the chamber published a list of five challenges that Luxembourg must rise to meet, including:
- Mitigating the effects of the crisis on business profitability by ensuring the continuation of aid programmes for as long as necessary;
- Consolidating the existing health system and developing a health industry ecosystem to further diversify the economy;
- Transitioning to a data-driven economy by developing an adequate infrastructure that reinforces cybersecurity and promotes digital upskilling and retraining;
- Promoting a circular and sustainable economy based on green energy and ecological transitions;
- Ensuring robust growth based on productivity gains.