Hong Kong ranks fifth in world’s most competitive economies, Singapore tops list

The administration said the ranking reflected the city’s economic recovery last year, citing support from the central government and local measures to boost market confidence, such as organising mega events and drives to lure capital and talent.

According to a government spokesman, “good progress” had been made as the new measures were “implemented steadily” and the new rankings “recognised Hong Kong as one of the most competitive economies in the world”.

The spokesman added that the city would continue contributing to overall national development while expanding its capacities and cultivating new growth areas so there would be more opportunities for residents and businesses.

The report said Hong Kong ranked first in international trade and business legislation, second in tax policy and third in international investment. The city also performed “strongly” in real GDP growth per capita, and improved on goods and commercial services exports and tourism receipts.

But the city ranked 65th out of 67 global economies in its management of inflation and rising living costs.

The report also noted a decline in adaptability of government policy and transparency, highlighting “a downturn in Hong Kong’s standing in the rule of law index from 17th to 22nd”.

“The decline in government efficiency is largely driven by decreases in public finance [from eighth to ninth place], institutional framework [from 11th to 12th place], and the societal framework [from 28th to 30th place],” José Caballero, senior economist at the IMD World Competitiveness Center said in the report.

Meanwhile, Singapore, reclaiming the top position that it last held in 2020, came in second in government efficiency. It beat Hong Kong in three key areas, coming in third in economic performance, second in business efficiency and fourth in infrastructure.

The centre said Singapore had marked “a return to form” as the city state, which ranked fourth last year, had shown “a particularly robust performance” in government and business efficiency.

The report mentioned that Singapore remained “well-positioned” in international trade and improved on international investment, while topping other indicators such as the availability of skilled labour.

Gary Ng Cheuk-yan, a senior economist with Natixis Corporate and Investment Bank, noted that Hong Kong’s economy only rebounded last year while other regions had recovered in 2022 after the Covid-19 pandemic.

The city still suffered from the “heavy aftereffects” of public policies that came out of the pandemic, but still had an had an edge in its tax regime, he added.

“Hong Kong is facing a big problem given its continued fiscal deficit for several years as the government has spent more money during the pandemic, while the economic growth has slowed down and reduced its income.”

The government recorded a deficit of HK$122 billion in the financial year 2022-23 and HK$100 billion in 2023-24. Its budget announced in February also predicted that its operating account would suffer a deficit this financial year ending in March 2025.

Ng suggested the administration narrow this deficit by reviewing its workforce and streamlining internal procedures to cut costs, as well as by helping small-to-medium-sized enterprises adopt digital technologies to improve their efficiency.

He added that the city’s political image had also been tarnished in recent years and thus urged the government to promote Hong Kong as an economic market-driven city.

Accountancy sector lawmaker Edmund Wong Chun-sek said the city still had a relatively weak economy and a persistent labour shortage, and called for the government to boost the job market by attract more highly-skilled talent.

The IMD World Competitiveness Ranking, which began in 1989, covered 67 global economies in its latest report.

Switzerland was the first runner-up in the overall rankings this year, while Denmark was placed third.

Last year, Denmark was the top-ranked country, followed by Ireland and Switzerland.