The Swiss foundation called the International Institute for Management Development (IMD), has published its World Competitiveness Ranking for the year 2023, ranking Slovenia 42nd out of 64 countries. While Denmark retained its position at the top of the ranking, Slovenia’s result is worse than last year, as we dropped four places. Infrastructure and government and business efficiency are the areas where significant drops were recorded.
The analysis, based on statistical data and surveys, included 235 different indicators (statistical indicators accounted for two-thirds of the data and surveys for one-third) and included a total of 64 countries. According to the Slovenian Press Agency, 100 Slovenian managers from small, medium and large enterprises also participated in the survey indicators. Inflation, geopolitical risks, changes in raw material and energy supply chains and the loss of traditional markets were key factors in deciding the competitiveness of the countries.
Denmark, which tops the list, is followed by Ireland, Switzerland, Singapore and the Netherlands. Ireland made the biggest jump among the top five countries, rising nine places, with Peter Stanovnik of the Institute for Economic Research (Inštitut za ekonomska raziskovanja) pointing out that this is mainly due to the USA’s direct investment in the country. Slovenia is among the 21 countries that have lost the most money this year. Of these, as many as 17 are European countries (Latvia, Germany, Luxembourg, Hungary and the UK saw the biggest falls). Spain and Italy, along with Denmark, have retained their rankings from last year, while eight countries have improved their rankings (Belgium, Ireland, Poland, the Czech Republic, Portugal, Turkey, the Netherlands, and Romania), according to the national media outlet’s web portal MMC. “The competitiveness of regions, countries and companies has been affected by a combination of geopolitical risks – most notably the Ukraine-Russia war – as well as the loss of traditional markets, inflation, and raw material and energy supply chains. Institutional frameworks and good education systems played a key role in this, too,” said Stanovnik.
The drop in economic performance as a result of high inflation
Economic performance, government efficiency, business efficiency and infrastructure are the systems that define national competitiveness, according to Sonja Uršič of the Institute for Economic Research. In economic performance, Slovenia dropped eight places and landed at 34th place. There are several reasons for this drop, Uršič said. The main reason is high inflation, which stood at 8.8 percent last year, compared with 1.9 percent the year before. Our country fell three places behind in government effectiveness, ranking 45th. Between 2018 and 2020, we saw an improvement in this area, thanks to improvements in public finances, but the latter is the reason for the fall we are seeing this year.
We also dropped three places in the area of business efficiency and infrastructure (to 46th and 36th place, respectively). The biggest drop was in technological infrastructure and basic infrastructure, pointed out Mateja Drnovšek from the Faculty of Economics in Ljubljana, while there is no change in education, but a slight improvement in scientific infrastructure.
The country faces a number of challenges
The country faces a number of challenges in all areas, in particular “accelerating the investment cycle, increasing real productivity growth, which is too low compared to the EU average, and changing business models in companies.” Risks in the area of public finances, measures needed to reduce the inflation rate and action on health reform were highlighted in the area of government effectiveness. The need to effectively implement the Recovery and Resilience Plan, to reduce taxation costs and to improve the business environment, including in the area of employment of foreign nationals, is also urgent, according to Stanovnik.
The staff deficit is one of the biggest challenges in the area of business efficiency, while staff training and motivation remain problematic. In the area of infrastructure, Stanovnik pointed to the need for investment in railways and energy projects, and also highlighted the issue of our country’s air connectivity. “The question is, of course, whether it is justified for Slovenia to go into the establishment of a new domestic airline. This is now a question of detailed analysis, so we do not go into another sunk investment,” he added. Rok Capl, Acting Director of the public agency Spirit Slovenia, said it is crucial that Slovenian companies have data that reflects “our position on the international market and our competitiveness on the market itself.” According to Capel, the information revealed by surveys such as this one is not only important for us, but also for other countries and the government as a whole. “Their findings help us to design programmes and policies in foreign markets that promote competitiveness, innovation and sustainable development in our country,” he said.