Canada has slipped a bit further down the rankings of the world’s most competitive economies, as the country’s lagging innovation puts it at a disadvantage to its international peers, the World Economic Forum (WEF) said.
The international economic foundation ranked Canada 15th out of 144 countries in its annual world competitiveness index, down one position from last year’s report. It was Canada’s lowest ranking since 2006 on the index, which scores economies on a wide range of criteria that contribute to competitiveness.
Switzerland remains the top-ranked country in the index, followed by Singapore. The United States rose two places, to third, amid signs of improving innovation and strengthening of its institutional framework.
“The productivity level … determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time,” the report said.
Canada’s 15th placing leaves it around the middle of the pack among developed countries – ahead of the likes of France, Australia and New Zealand, yet trailing much smaller advanced economies such as Singapore and Denmark. As recently as 2009, Canada ranked ninth in the WEF’s annual ratings, as its financial-system stability and relative economic health gave it a considerable competitive advantage over many of its badly wobbling global peers. But as the world’s economy and financial system has recovered, Canada’s position in the rankings has eroded.
Canada’s slipping competitive status highlights some of economists’ biggest long-term concerns about the Canadian economy: Underinvestment in innovation and technology that continues to hamper the country’s chronically sluggish productivity growth. WEF chief economist Jennifer Blanke said that while Canada has a solid foundation for fostering competitiveness – solid institutions and rule of law, strong health care and childhood education systems, a stable economy and reliable financial markets – it slips in the more sophisticated measures that separate the most competitive countries from the pack.
“Canada really gets the basics right. That’s not to be taken lightly, because a lot of countries don’t,” Ms. Blanke said. “But in the more complex issues, that’s where Canada is struggling.”
She pointed out that Canada’s private-sector spending on research and development ranks just 27th in the world, while university/industry collaboration on R&D ranks 19th. In government procurement of advanced technology – a key driver of technological innovation in the world’s most competitive economies – Canada ranks 48th. Businesses consider Canada’s regulatory structure overly burdensome (ranked 39th) and cite its government rules as discouraging foreign direct investment (ranked 52nd).
And Canada is slipping up at the higher levels of education and training – considered a critical building block for future innovation. While Canada’s primary school enrolment ranks second in the world, secondary enrolment is only 23rd, and post-secondary enrolment ranks only 45th.
“Structurally, we’re not doing as well at innovation as we need to,” said Daniel Muzyka, president of the Conference Board of Canada, the WEF’s Canadian partner in the global study. “We’re not really mobilizing to become more competitive.”
“We’re doing adequately. As a small exporting nation, we need to do better.”
Editor's note: An earlier version of this story spelled Mr. Muzyka's name incorrectly.