20.5.09

Stress Test Humbles Leading Nations

After the US stress test of its banking sector, academics have done a stress test of countries, to see who is best placed to rebound from the global economic crisis.

Researchers at IMD business school in Lausanne, Switzerland, warn that they collected much of the data in 2008, before the downturn kicked in - so the outlook for some countries may be even worse.

COULD GET WORSE

The full impact of the global crisis will only be apparent at the end of 2009 or early 2010, the researchers say.

The IMD stress test survey is linked to a regular competitiveness survey - but this time the Lausanne business school wanted to look at ability to recover from the crisis.

The survey favours smaller countries as they tend to rebound first from global crises. That's why Denmark finds itself in first place.

What's interesting is the tensions between the two tests - competitiveness and stress test. The USA comes first in competitiveness but only 28th in the stress test.

SMALL TO REBOUND FIRST

"The UK (34th) is in a disquieting position; just as is France (44th), Italy (47th) and Spain (50th), stressing how much the recovery in these countries may be hampered by structural rigidities. Finally, Russia in 51st position may not have had enough years of economic growth to consolidate the structure of its economy and to create the necessary buffer to cope with a crisis of this magnitude.

“In short, the Stress Test shows that smaller nations, which are export-oriented, resilient and with stable socio-political environments are better equipped to benefit immediately from the recovery,” concluded Professor Garelli. “However, only the good performance of the very large exporters such as the US, Germany, China or Japan will send a credible message to the world that the worst is over – a change that everybody will be able to believe in.”

BUSINESS NOT BANKING

The stress test uses 20 criteria, based on forecasts. The World Competitiveness ranking is a deeper, long running survey, based on 329 criteria, two-thirds of them data, while the rest is based on surveys of almost 4,000 managers worldwide.

The results are sifted four ways: economic forecasts; attitudes to government and business; business conditions; social conditions.

This is my extraction from the two surveys

Competitiveness Test, Stress Test
USA 1 28
Germany 13 24
Ireland 19 25
Britain 21 34
France 28 44
Russia 49 51

The survey is worthy because it focuses on the views of business, while much of what passes for common knowledge is distorted by the views of bankers, through the influence they wield on politicians and the press.

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