Australia, Chile and China top business growth environment index

Last week, we released the results of the Grant Thornton Global Dynamism Index (GDI) 2013. This is the second year we have released these results. We are seeing the beginning of trends in the data but there was also some interesting movement up and down the rankings.

The GDI is an annual research project, developed for us by the Economist Intelligence Unit. The model looks at 22 indicators to rank the dynamism of 60 of the world’s largest economies, revealing which offer the best environments for growing businesses. It differs from the World Economic Forum Global Competitiveness Report in that it measures the changes in an economy which are likely to lead to a faster future rate of growth.

In other words, it is a relative rather than an absolute measure. For example, Australia tops the GDI 2013, but the index is not saying that it offers the best environment for growing businesses. Rather that over the past 12 months, Australia’s business growth environment improved more than any other economy analysed. It is an important distinction which helps explain why Venezuela, fuelled by the pre-election spending of Hugo Chavez, ranks above Brazil this year.

Australia is followed by Chile [ 2456 kb ] in this year’s rankings. This speaks to the rapid development of its economy in terms of rules and regulations, political and institutional stability, the ease of doing business and access to finance. That Chile became the first South American country to join the OECD in 2010 is another indication of the progress the economy has made over the past couple of decades.

But the result which really caught my eye was that of China [ 2193 kb ]. It moved up 17 places this year to rank third. By contrast, its BRIC counterparts all fell back to rank between 42 and 48. In the first half of the year, the slowdown in China and the rise of so-called ‘shadow banking’ practices, led some commentators to predict a ‘hard landing’ for the economy. But recent data look more positive and the new leadership’s commitment to financial reform should help as the economy rebalances. China’s GDI result was driven by investment in R&D and IT – further evidence of the measures China is putting in place to increase its attractiveness to growing businesses.

Elsewhere, many European economies fell back due largely to poor economic performance and declining access to finance. The problems in the eurozone are far from over but the region returned to growth in Q2 and the sound economic fundamentals highlighted by the GDI – especially in the Nordic region – suggest long-term business growth prospects remain robust.

The US slipped out of the top ten due to an increase in consumer indebtedness but remains well-placed in eleventh. Canada jumped to fifth on the back of an improvement in the overall financing environment. Middle East and African economies all rank in the bottom half of the index with the UAE best-placed in 35th.

The results are truly fascinating and indicate  that the development of a dynamic business growth environment is varied and complex.