Switzerland keeps crown as most competitive economy

By Tom Miles

GENEVA (Reuters) - Switzerland has kept its title as the world's most competitive economy for the fifth year running, though it needs to resist any temptation to protect its core banking sector if it wants to stay top, the World Economic Forum said on Wednesday.

The Geneva-based body, most famous for gathering politicians and billionaires at an annual shindig in the Alpine resort of Davos, said the same economies made the top 10 as last year, but in a different order.

Singapore and Finland remained in second and third place respectively in the Forum's annual Global Competitiveness Report.

Germany, the United States, Hong Kong and Japan all edged up while Sweden, the Netherlands and the United Kingdom all slipped by two or three notches.

The United States' flair for innovation helped it reverse a four-year downward trend, although serious concerns remained over its macroeconomic stability, the Forum said, ranking it 117 out of 148 countries in that category.

The Forum bases its assessment on a dozen drivers of competitiveness, including institutions, infrastructure, health and education, market size and the macroeconomic environment.

The report also factors in a survey among business leaders, assessing the government's efficiency and transparency.

Switzerland scored well across the board, but the report said it needed to guard against complacency.

"Its banking sector is ... under scrutiny, and this traditional economic engine is necessarily undergoing great change," the report said.

"In the future, it will be important for the country to continue to build on its competitive strengths and resist over regulation and protectionism," it added.

Switzerland has been hit hard by a global crackdown on tax havens, succumbing to pressure from the EU and the United States to give up a centuries-old tradition of banking secrecy.

While most of the top 40 remained relatively static, South Korea slid six places to 25th, weakened by its poorly functioning financial market, quality of its institutions and extremely rigid labor market, said the report.

China remained in 29th place and again led the BRICS pack, while Indonesia climbed 12 places to 38th, helped by a 17-place jump in infrastructure and other advances.

"After years of neglect, Indonesia has been boosting infrastructure spending to upgrade roads, ports, water facilities, and power plants, and our results suggest that these improvements have started to bear fruit," the report said.

It also made a big improvement in labor market efficiency, but was let down by bribery, security and a worsening health picture.

India slipped one position to 60th while Russia edged up three spots to 64th, helped by an improving macroeconomic environment.

There was also little change at the bottom of the list. The overall wooden spoon went to Chad, just behind Guinea and last year's loser Burundi.

The report defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country".

(Reporting by Tom Miles; Editing by Andrew Heavens)

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