US competitiveness 'threatened'

China's government must keep pace with its economic growth

The US economy remains the most competitive in the world but faces being held back by its nation's debt and budget deficit, a study says.

The IMD World Competitiveness Yearbook ranks 61 countries and regions using more than 300 pieces of data.

Its 2006 ranking indicates that more efficient Asian and Nordic economies are closing the gap on the US.

Elsewhere, it says China's and India's governments are struggling to keep up with their economies' rapid pace.

MOST COMPETITIVE ECONOMIES 2006 1. US (1) 2. Hong Kong (2) 3. Singapore (3) 4. Iceland (4) 5. Denmark(7) 6. Australia (9) 7. Canada (5) 8. Switzerland (8) 9. Luxembourg (10) 10. Finland (6) Source: IMD (Figure in brackets denotes last year's ranking)

Hong Kong and Singapore remained second and third in the rankings, followed by Iceland. Demark was the most competitive EU country, placed fifth.

The UK climbed one place to 21st position, while the Irish Republic was ranked 11th.

'Growing gap'

IMD, a Swiss-based business school, found that the US and France had the biggest gap between the contribution of the government and the contribution of the economy to competitiveness.

While the US economy was growing at 3.5%, the government had a $318bn budget deficit and had racked up an $8 trillion debt - growing by $2bn a day, the report said.

"A growing gap between governments and economic performance is always a bad omen for the future," editor of the study, Stephane Garelli said.

China's sharp economic growth took it 12 places up the competitiveness table to 19th position, while India also surged forwards to 29th place from 39th in 2005.

Professor Garelli said governments of both countries now faced the challenge of keeping pace with real economic expansion.

"Their task now is to meet the standards and expectations of a buoyant economy," he said.

"Failure to do so may create economic and social imbalance that could jeopardise what has been achieved so far."

The IMD assessment used 312 pieces of data - measuring economic performance, government, business efficiency and infrastructure. It also included factors such as education, technology, health and social services.