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U.S. Is World’s Most Competitive Economy for First Time in a Decade

Country regains top spot in World Economic Forum rankings thanks to strong economic growth; report says room for improvement on social issues

 

The report’s authors cautioned that the U.S. could still improve on competitiveness. When measured on judicial independence and levels of corruption, the U.S. falls outside the top 10. Photo: David Stockman/Zuma Press

The U.S. is back on top as the most competitive country in the world, regaining the No. 1 spot for the first time since 2008 in an index produced by the World Economic Forum, which said the country could still do better on social issues.

America climbed one place in the rankings of 140 countries, with the top five rounded out by Singapore, Germany, Switzerland and Japan. All five countries’ scores rose from 2017, with the U.S. notching the second-biggest gain after Japan’s.

The top spot hasn’t gone to the U.S. since the financial crisis stalled output and triggered a global economic slowdown.

“Economic recovery is well underway, with the global economy projected to grow almost 4% in 2018 and 2019,” said the report, published Tuesday by the organization that produces the Davos conference on global politics and economics.

Created with Highcharts 6.0.4Economic DynamosThe U.S. hasn’t held the top spot in thecompetitiveness index since the financialcrisis.Most competitive economies, 2018Source: World Economic ForumNote: Score is out of 100, ideal competitiveness

Created with Highcharts 6.0.4Improvement from previous year1. U.S.(score: 85.6)2. Singapore(83.5)3. Germany(82.8)4.Switzerland(82.6)00.20.40.60.81

However, “recovery remains vulnerable to a range of risks and potential shocks,” the authors warned. They cite a brewing trade war between the U.S. and China as a possible hindrance to growth that could potentially derail the recovery and deter investment. The U.S. has levied tariffs on a total of $250 billion of Chinese goods and China has retaliated with tariffs on $110 billion of U.S. exports as the two nations spar over trade imbalances and other issues.

Companies that have repatriated manufacturing to the U.S. say that tariffs are increasing their costs and making them less competitive.

The Global Competitiveness Report this year assessed 140 countries on 98 indicators that measure business investment and productivity. The indicators are organized into 12 main drivers of productivity including the nations’ institutions, tech savvy, infrastructure, education systems, market size and innovation.

The report scores countries on how closely they match up to the competitive ideal. The U.S. scored 85.6 out of a possible 100. America’s vibrant entrepreneurial culture and its dominance in producing a competitive labor market and nimble financial system “are among the several factors that contribute to making the U.S.’ innovation ecosystem one of the best in the world,” the report said.

Still, “There is still room for improvement,” according to the authors. While the country’s institutional framework remains relatively sound, there are indications of a weakening social fabric and worsening security situation, it found. The report notes the U.S. homicide rate is five times the average for advanced economies.

When measured on judicial independence and levels of corruption, the U.S. falls outside the top 10.

The country also lags behind most advanced economies in terms of healthy life expectancy, which measures expected years of life in good health. The U.S. figure is 67.7 years, slightly lower than Sri Lanka’s and China’s and three years below the average for advanced economies.

Technology penetration is also relatively low compared to other developed economies, including mobile-broadband subscriptions and internet use. Only 76% of adult Americans regularly use the internet, below the average for the Organization for Economic Cooperation and Development.

Overall in the index, Switzerland fell to fourth place this year from first place last year, overtaken by the U.S., Singapore and Germany. The top 10 was completed by Japan, the Netherlands, Hong Kong, the U.K., Sweden and Denmark.

The rankings rely on public data on measures such as inflation and debt levels along with a survey of chief executives.

Write to Joanna Sugden at joanna.sugden@wsj.com

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