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The Mohammed Bin Rashid School of Government (MBRSG) has unveiled the third edition of the ‘Global Economic Diversification Index (EDI)’ at the 2024 World Governments Summit (WGS) during a pivotal session around ‘Shaping Future Governments’.
As a universally accepted economic diversification index, the Global EDI considers multiple dimensions, such as the diversification of economic activities, international trade patterns, and the composition of government revenues, to evaluate and rank countries based on the breadth of their economic diversification.
The 2024 Global EDI broadened its analysis to cover 112 countries, an increase from 105 in the previous year. The expanded analysis also extended from the year 2000 through to the COVID-19 affected years of 2020-2022, utilizing 25 publicly available quantitative indicators to measure countries' economic diversification.
For the first time, the Index introduced three digital-trade specific indicators, leading to the creation of a revised trade subindex named Trade+. This addition enables a more detailed examination of digital trade's role in economic diversification, resulting in a new EDI+ score, which is calculated for the years 2010-2022, for a subset of 106 countries.
The inclusion of digital trade indicators marks a pivotal enhancement in the Index, reflecting the increasing importance of the digital economy in global trade and economic development.
2024 Global EDI key findings run as follows:
- The United States, China and Germany maintained their positions as the top three diversified economies.
- Western European nations accounted for almost two-thirds of the top 20 highly ranked nations.
- High-income nations dominated the top 30 diversified economies, with notable inclusions of upper-middle-income countries such as China, Mexico, Thailand, and the lower-middle-income country, India.
- The MENA region saw a significant reduction in its representation among the bottom 20 ranks, decreasing to 10% in 2022 from 25% in 2000.
- South Asian economies exhibited a substantial improvement in their economic diversification, particularly when digital trade was taken into account. This was evident in their Trade+ scores and the broader EDI+ rankings.
- Gulf Cooperation Council (GCC) countries, especially the UAE and Bahrain, have shown notable progress in their EDI scores, attributed to accelerated reforms post-pandemic, including technology sector investments, tax base expansions, trade liberalization, and regulatory improvements.
According to the report, the aftermath of COVID-19 may be more challenging for nations with lower rankings to improve their positions, considering the prolonged economic damage and reduced output caused by the pandemic, compounded by their already constrained fiscal capacities and pre-existing debt burdens.
However, it also highlighted the positive impacts of digital economy investments on trade diversification, especially in facilitating service exports. This suggests significant potential for commodity-producing countries to enhance their economic diversification through digital technology adoption.
The Global EDI is designed to serve as a comprehensive policy tool, aiding governments in understanding and implementing successful diversification plans. By incorporating digital trade into its analysis, the EDI provides a more nuanced view of the global economic landscape, offering valuable insights for policymakers worldwide.
Through its Policy Research Department, the MBRSG strives to enrich government decision-making locally and internationally, offering primary data sets and evidence-based recommendations across various policy domains.
The full EDI report, including detailed findings, datasets, and interactive visualizations, is available on the EDI’s official website: www.EconomicDiversification.com. The report, alongside hundreds of other research documents, can also be downloaded in both Arabic and English from the MBRSG's policy research repository at www.MBRSG.ae/Research
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