Last year, Sweden grabbed the third spot in the annual Global Competitiveness Report compiled by the organization that hosts the get-together of business and political leaders held each year in Davos, Switzerland.
But in the 2012-2013 report, released on Wednesday by the World Economic Forum (WEF), Sweden found itself overtaken by neighbouring Finland, which grabbed the third spot ahead of top ranked Switzerland and second-place Singapore.
The report praised Sweden’s public institutions as “first-rate”, citing their efficiency and transparency.
In addition, private firms in Sweden received high marks from the WEF for their “excellent ethical behavior”.
“Nevertheless, we registered a slight but consistent deterioration in the country’s institutional framework over the past three years,” the WEF wrote in its report.
While Sweden received top marks for technology readiness, it was ranked close to the bottom of the 144 countries when it came to the flexibility of wage determination, as well as the country’s hiring and firing practices.
The organization also cited Sweden’s relatively high youth unemployment rate as one reason for its slightly weaker performance on the WEF’s review of the social sustainability of countries’ competitiveness.
According to the WEF, Sweden’s tax rates and restrictive labour regulations are the most problematic factors for doing business in Sweden.
While European countries, especially in the north, continue to dominate the list of the world’s 10 most competitive nations, those in the southern part of the continent dipped further down the list.
Crisis-hit Greece, for instance, slipped to 96th place out of the 144 countries ranked, from 90th last year, while Portugal dropped to 49th from 45th place and Spain held its ground at 36th.
France also fell off the top 20 list, dropping to 21st place from 18th last year and 15th in 2010.
While WEF economist Thierry Geiger told AFP this small but negative trend in was worrying because it reflected a significant drop in French government efficiency in the past couple of years, as well as in the macroeconomic environment and especially labour market efficiency.
The United States, which just five years ago topped the WEF ranking, also continued its decline, falling to seventh place from fifth last year.
WEF senior economist Margareta Drzeniek Hanouz stressed that the United States “still has one of the most sophisticated business environments in the world.”
However, she told AFP, the country is facing large “macroeconomic vulnerabilities”, including the rising deficit, and at the same time severe political deadlock and a dwindling trust in politicians.
“This results in an inability to address some of the major problems they’re facing,” she said, stressing that the politician fatigue was directed at both of the country’s main political parties.
The WEF report was based on publicly available data and a survey of 15,000 business leaders in 144 countries.