Credit: IMD
Luxembourg has dropped three places for competitiveness compared to last year in the latest World Competitiveness Yearbook, run by the Swiss International Institute for Management Development (IMD).
Luxembourg now ranks 15th out of 63 countries - its worst ranking in ten years. According to the IMD ranking, three areas stand out when examining the current shortcomings of the Luxembourg economic model. With continuous stagnation in productivity, the Grand Duchy is coming to the end of its extensive growth model, which calls for a (rapid) transition to qualitative growth. In addition, the difficulty in finding talent is increasing every year. Finally, Luxembourg is lagging behind in terms of digital transformation compared to the most advanced economies in this area.
The weaknesses highlighted by this ranking suggest that the world of the future will be a digital one where sectors with high added value, the ability to innovate and talent will make all the difference. Luxembourg will therefore have to build the appropriate recovery plan to support the economy, regain competitiveness and reactivate sluggish productivity, according to the Chamber of Commerce which published the rankings this morning.
The 2020 edition of the World Competitiveness Yearbook therefore sees Luxembourg move away from the top 10 most competitive countries over the long term. However, the country retains strong points, namely sustained growth, relatively healthy public finances, an internationally competitive financial centre and legislation that attracts patent applications.
2020's most competitive countries were Singapore, Denmark and Switzerland, ahead of the Netherlands and Hong Kong. All of these countries are ahead of Luxembourg on the various indicators linked to digitalisation, one of the levers available to continue improving economic efficiency.
According to IMD, the top five challenges facing Luxembourg in terms of competitiveness in 2020 are: implementation of the recovery plan to respond to the COVID-19 crisis (support for economic activity, consumption, public investment, incentives for private investment and a massive health plan); transition to a growth model based on productivity gains and sustainable management of environmental resources; rediscovering cost competitiveness as a result of the increase in labour costs and the intensification of the tax burden (in comparison with other European and international contexts); improving support for small and medium-sized enterprises (SMEs; access to finance, over-regulation, development of economic activity zones and business succession); and updating bankruptcy legislation.
