Growing businesses would be wrong to overlook developed economies in favour of emerging economies, according to the new Grant Thornton Global Dynamism Index (GDI). The index reveals that despite facing low growth in the short-term, many developed economies still offer businesses favourable conditions for future growth. Mature economies also score more highly than emerging economies for the dynamism of their financing environment.
Developed in conjunction with the Economist Intelligence Unit, the GDI ranks 50 economies on 22 indicators of dynamism. It reveals that the Nordic region is the most dynamic [1] in the world, scoring [2] 66.1 out of 100. The mature economies of North America (62.9) and the G7 (59.6) come second and third. These are higher than the scores for the largely developing regions of Eastern Europe (55.7), the Growth-8 [3] economies] (55.0), Latin America (53.8) and the Middle East and Africa (51.0), although Asia-Pacific (59.3) is just ahead of Western Europe (59.2).
Ed Nusbaum, CEO of Grant Thornton International said: At first glance, the GDI results may appear counterintuitive. Reason suggests that emerging markets are growing faster at the moment and therefore offer more commercial opportunities. However, instinct should tell businesses to look beyond GDP growth rates to the other attributes of mature economies that make them excellent locations for future business growth.
For example, the top three economies “ Singapore, Finland and Sweden are all trade oriented, have well developed legal frameworks and invest heavily in R&D, attributes indicative of an environment with fosters business growth.
Economic growth is just one of five areas highlighted as central to the dynamism of an economy; the others being business operating environment, science and technology, labour and human capital and the financing environment. This means the ranking goes well beyond the headline growth figures that are used to assess economic health.
Ed Nusbaum continued: The importance of dynamism in an economy cannot be understated. Commentators in the US have said recently that the country will lose its identity on the global stage if it loses its economic dynamism. I agree and urge countries around the world to look at how they can boost the dynamism of their economies to boost global growth.
Clearly, there are many different paths to achieving growth, and different factors will work better for different businesses. But the greatest takeaway for me is certainly that businesses should not give up on the developed economies just yet.
[1] "Dynamism" is defined as changes to the economy which have enabled recovery from the 2008-09 economic recession and are likely to lead to a fast rate of future growth.
[2] Modelling the indicators and categories results in scores of 0-100 for each country, where 100 represents the most dynamic environment and 0 the least.
[3] Brazil, China, India, Indonesia, Mexico, Russia, Korea, Turkey