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Europe’s biggest economy is officially losing its competitiveness

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
Chancellor Angela Merkel stands next to company CEO Martin Herrenknecht as she visits the Herrenknecht company on October 7, 2019. Credit: Patrick Seeger/dpa/AFP via Getty Images.

Germany has plunged from third place in 2018 to seventh place in this year’s World Economic Forum Global Competitiveness report. Long the economic engine room of Europe, Germany now comes in after Japan in sixth place. Singapore leapfrogged the US to top the rankings in 2019.

A failure to invest in its digital infrastructure is hobbling Germany, according to the report. The country comes in in 58th place for the state of its mobile broadband infrastructure, and a lame 72nd place for its fibre-optic internet connections.

The WEF report points out that the world is “at a social, environmental and economic tipping point” noting that “gridlock in the international governance system and escalating trade and geopolitical tensions are fuelling uncertainty” which is hampering investment “and increases the risk of supply shocks: disruptions to global supply chains, sudden price spikes or interruptions in the availability of key resources.”

The German economy has been teetering on the brink of recession this year. The economy contracted by 0.1% in the second quarter, and with factory orders in August fell by 0.6% from the month before.

It is not all gloom for Germany; it scored top marks in the innovation category, thanks largely to high number of its patent registrations and scientific publications. It also topped the chart in overall macroeconomic stability, which takes into account inflation and debt levels.

The WEF defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country” and, by extension, affect the well-being of citizens. It has been producing the report for 40 years this year.

READ MORE: Recession beckons for Germany as economy contracts