Rankings

Chinese city rankings: Streets of plenty

- Sep 2nd 2008

THE port city of Shanghai is the best place in mainland China for doing business, according to a new set of rankings from the Economist Intelligence Unit (see background and methodology). Shanghai tops an overall ranking of 44 Chinese cities that were compared in five key areas—economic performance, market opportunities, labour market, infrastructure and environment. Hard on its heels come fast-growing Guangzhou (top for infrastructure) and the capital, Beijing (home to the best labour market). The top 15 also includes large cities focused on the booming domestic market, such as Tianjin and Chengdu. Cities with lower external trade exposure have performed well during the recent slowdown in global growth, and are likely to continue to do well over the next decade as a maturing Chinese economy becomes less dependent on exports for growth. The ranking was compiled by the China Regional Forecasting Service, a new business information service launched by the Economist Intelligence Unit.

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Operational risk ratings: Watch your step

- Aug 12th 2008

Risk Briefing rates operational risk in 150 markets on a scale of 0-100. The overall scores are an aggregate of underlying scores for ten categories of risk: security; political stability; government effectiveness; legal and regulatory; macroeconomic; foreign trade and payments; financial; tax policy; labour market; and infrastructure. The model is run when events require it, and at least once a quarter for each country.

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Country risk ratings: Crunched

- Aug 1st 2008

The credit crunch continues to depress ratings in the developed world. While the emerging world largely dodged the subprime bullet, it is beginning to feel the impact of the credit crunch and the slowdown in the OECD. Inflation is also having an adverse effect on emerging market risk scores. Inflationary pressures are in part due to high fuel and food costs, but also sometimes reflect overheating and capacity constraints. Central banks are generally behind the curve in tightening monetary policy and will have to raise interest rates aggressively to rein in inflation. This will create strains for companies and households which have borrowed heavily in the boom years, particularly if output growth slows.

Ireland suffered the largest deterioration in its score in July, by five points to 24; Cyprus had the biggest gains, with its score improving three points to 32. Ireland's construction industry is contracting sharply and property prices are in their second year of decline. Record levels of household debt create a worrying outlook for Ireland's banks, which will need to raise fresh capital. Cyprus, meanwhile, is benefiting from its switch to the euro in January 2008, which has eliminated the exchange-rate risk of its fast-rising stock of euro-denominated debt. Public finances are in reasonable shape, and last year's budget surplus was much larger than expected. Fiscal policy will be loosened in 2008-09, causing the fiscal balance to swing back into deficit, but it will remain well below the EU's “stability and growth pact” ceiling of 3% of GDP.

The Economist Intelligence Unit's Country Risk Service assesses credit risk across 100 emerging markets and 20 developed economies.

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Global business barometer: Glasses half-empty, for now

- Jul 29th 2008

Business confidence is falling but at a less alarming rate than previously, according to the latest global business barometer, a quarterly survey of more than 1,000 executives conducted for The Economist by the Economist Intelligence Unit, its sister company (see full report and methodology). The overall confidence index, which measures the balance of bosses who think business will pick up over those who expect it to worsen, was still fairly negative. Yet most industries saw only a small decline in confidence, and the mood of executives in entertainment, media and publishing, and in health care has lifted a little. North and Latin America were the only regions to see an overall improvement in executive mood in the past three months.

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Big Mac index: Sandwiched

- Jul 25th 2008

EVER since the credit storms first broke last August, the prices of stocks, bonds, gold and other investment assets have been blown this way and that. Currencies have been pushed around too. Did this buffeting bring them any closer to their underlying fair value? Not according to the Big Mac index, our lighthearted guide to exchange rates. Many currencies look more out of whack than in July 2007, when we last compared burger prices.

The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just a single item, a Big Mac hamburger, but one that is sold around the world. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value yardstick.

Only a handful of currencies are close to their Big Mac PPP. Of the seven currencies that make up the Federal Reserve's major-currency index, only one (the Australian dollar) is within 10% of its fair value. Most of the rest look expensive. The euro is overvalued by a massive 50%. The British pound, Swedish krona, Swiss franc and Canadian dollar are also trading well above their burger benchmark. All are more overvalued against the dollar than a year ago. Only the Japanese yen, undervalued by 27%, could be considered a snip.

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Business environment rankings: The Danes have it

- Jul 10th 2008

Denmark will be the best place in the world to conduct business over the next five years, according to the Economist Intelligence Unit's latest business environment ranking. The country scored well in all ten ranking categories (see methodology) and stands out in particular for three things: its successive governments' pro-business policies; structural reforms that have increased labour market flexibility; and a fiscal policy that has targeted surpluses without compromising the quality of public services.

One of the most attractive aspects of Denmark's business environment is its labour market—Denmark's "flexicurity model" has become the yardstick for reforms in other European countries in recent years. The system combines low, non-wage labour costs and few restrictions on hiring and firing with high unemployment benefits (funded by the state, not business, via income tax) and opportunities for workers to upgrade their skills. This provides a high degree of flexibility for employers while generating a high level of employment and income security. Denmark's overall tax burden and marginal taxes are high, but these help maintain a well-educated workforce, good transport and communication infrastructures, and excellent public services.

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Global business barometer: White-collar blues

- Jun 16th 2008

Business confidence is ebbing fast, according to the latest global business barometer, a quarterly survey of more than 1,000 executives conducted for The Economist by the Economist Intelligence Unit, its sister company (see full report and methodology). The overall confidence index, which measures the balance of executives who think business will improve over those who expect it to worsen, has plunged deeper into the red. Those in construction and real-estate are slightly less miserable than three months ago. Executives in all other sectors feel much worse—they are gloomiest in financial services. Spirits are still lowest in North America. They are highest in the BRIC countries (Brazil, Russia, India and China), but even there have dropped sharply since the last survey.

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E-readiness ranking: Logging on

- Jun 16th 2008

E-readiness continues to advance across the globe, according to the Economist Intelligence Unit's latest ranking (see full report and methodology). The average e-readiness score of the 70 countries surveyed rose to 6.39 (on a scale of one to ten), up from 6.24 in 2007. Yet this overall progress masks some backtracking among a handful of countries, notably within the top ten. After four consecutive years as the world's most e-ready country, Denmark has fallen four places, as has Switzerland. Similarly, Finland has dropped three places and has been supplanted in the top ten by Austria. America is now the global e-readiness leader, with a score of 8.95, followed closely by Hong Kong, which has advanced two places.

Maintaining the momentum of digital development is clearly quite tough. European leaders in information and communications technology (ICT) have been unable, in some areas, to sustain the heady pace of development they had previously established. Both Finland and Denmark, for instance, were unable to maintain previous ICT spending levels or to improve upon an already impressive record of public and corporate access to digital channels. By contrast, those countries that have advanced in the top 10—America, Hong Kong, the Netherlands and Australia—have done so largely on the back of improvements in connectivity—both in fixed and wireless broadband access, as well as in their innovation environments.

The gap between the "haves" and "have-nots" in the rankings narrowed again in 2008, but by a much slimmer margin than in previous years. The least e-ready countries have registered no upward movement in their rankings (although most have improved their scores), partly because their business environments have deteriorated or improved only slightly. Connectivity improvements in some developing countries, particularly in Latin America, are also alarmingly slow. Other lower ranked countries, however, such as Saudi Arabia, Thailand and Egypt, have moved upwards thanks mainly to faster progress in connectivity.

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Country risk ratings: European stability

- May 27th 2008

The credit crunch continues to depress ratings in parts of the developed world, while the ratings of emerging markets are generally holding up well. Emerging-market banks have reported surprisingly little exposure to toxic securities linked to American subprime mortgages. Emerging-market economies have so far proved resilient to the downturn in America, cushioned by robust domestic demand.

Britain was among the countries suffering a deterioration in its score in March, by three points, to 23. This reflected slower growth and a weaker housing market. Britain's banks have suffered from exposure to securities related to American mortgages and from the tightening in global liquidity. They face a difficult outlook in their home market given record levels of household debt and the risk of a correction in the richly valued British housing market. Some banks may have to raise fresh capital to restore capital adequacy ratios.

Cuba's score was stable at 66 following Fidel Castro's retirement from the presidency in February 2008. The long-running hostility between Cuba and America, the government's wariness of private business and the maintenance of the one-party system are unlikely to be affected by the transition. The new president—Fidel's brother, Raúl—had been deputising since July 2006, ensuring a smooth succession. That said, the new leadership will not enjoy the same degree of undisputed authority, so there will be pressure for change. If the government fails to respond to public frustration with economic hardship and political restrictions, there is a possibility that dissent might strengthen sufficiently to present a serious threat to the political stability.

The Economist Intelligence Unit's Country Risk Service assesses credit risk across 100 emerging markets and 20 developed economies.

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Worldwide Cost of Living survey: Dearest of them all

- May 27th 2008

Oslo remains the world's most expensive city to live in, according to the Economist Intelligence Unit's Worldwide Cost of Living survey. The continued strength of European currencies means that Tokyo is the only non-European city among the ten dearest. London also leapfrogs Copenhagen to occupy third place, just behind Paris. At the other end of the ranking, the subcontinent appears to offer value for money, containing half of the ten cheapest destinations. The undermining of the Venezuelan Bolivar by black-market rates puts Caracas alongside Tehran as the joint cheapest city overall.

The Worldwide Cost of Living survey compares the cost of living in over 130 cities in nearly 90 countries. It gathers detailed information on the cost of more than 160 items—from food, toiletries and clothing to domestic help, transport and utility bills—in every city. More than 50,000 individual prices are collected in each survey round, and a cost-of-living index is calculated from the price data to express the difference in the cost of living between any two cities.

The fieldwork for the Worldwide Cost of Living survey is carried out by researchers from the Economist Intelligence Unit. Great care is taken to assess accurately the normal or average prices international executives and their families can expect to encounter in the cities surveyed.

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