Since the Great Recession almost a decade ago many countries have struggled to reach earlier levels of economic performance. Economic growth is primarily a consequence of three factors: a growing labour force, a rise in capital stock, and improvements to productivity. Productivity therefore plays a crucial part in countries’ quest for economic growth and prosperity.
Numerous factors are likely to influence productivity in each country, but for public policy makers and investors, it is important to understand how some of the major productivity drivers evolve over time and how each country’s performance compares with its peers. Such insights enable better understanding of the economic growth potential of their country and how its future course could be improved.
The Variables for Sustained Growth (VSG) Index was developed in order to compare the productivity potential of different countries across a broad range of factors. The index is part of a set of models that KPMG uses to assess countries’ long-term economic growth, and is focused on those areas that policy makers can influence.
The VSG Index comprises 21 series, selected from academic studies and business survey results, to assess countries’ productivity potential. The importance of each series within the index, as captured by the weights applied to each series, was determined by econometric analysis, as well as by primary research.
The top performers in this year’s index are again dominated by Western Europe, with Singapore and Hong Kong the only non-European countries to make it to the top 10.