The economic downturn that’s swept the globe has crushed financial markets, exploded unemployment and shaken confidence in the banking system.
The disaster isn’t shared equally, though. Some countries are in a much better position than others to rebound from the current malaise by attracting entrepreneurs, investors and workers.
Who are they? Our fourth annual Best Countries for Business ranking looks at business conditions in 127 economies. Topping the list for 2009: Denmark, for a second straight year, takes the No. 1 spot. The U.S. is up two spots to No. 2, Canada is up four spots to No. 3, Singapore is up four to No. 4 and New Zealand is up seven to No. 5.
Overall rank: 1
GDP per capita: $38,900
GDP, real growth rate: 0.3%
Population (millions): 5.5
Trade balance as % of GDP: -0.6%
Federal budget balance as % of GDP: 6.7%
After a long consumption-driven upswing, Denmark’s economy began slowing in early 2007 with the end of a housing boom. Along with the U.K., one of the notable holdouts from the group of 15 European countries using the euro currency.
Overall rank: 2
GDP per capita: $48,000
GDP, real growth rate: 1.4%
Population (millions): 303.8
Trade balance as % of GDP: -5.6%
Federal budget balance as % of GDP: -3.1%
The biggest economy in the world and third-largest population, the U.S. continues to support business-friendly economic policies, despite a recent move in the balance of power from Wall Street to Washington. Broad policy shifts such as Cap and Trade, though, threaten to damage its economic competitiveness, particularly in industrial sectors.
Overall rank: 3
GDP per capita: $40,200
GDP, real growth rate: 0.7%
Population (millions): 33.2
Trade balance as % of GDP: 1.9%
Federal budget balance as % of GDP: 0.2%
Trade and budget surpluses, tax relief from the current administration and conservative lending practices of its banks have left the U.S.’ northern neighbor in an enviable position amid global tumult. Reignited demand for commodities in the face of U.S. inflation could help reverse export declines in this gold- and oil-sands-rich nation.
Overall rank: 4
GDP per capita: $52,900
GDP, real growth rate: 3.0%
Population (millions): 4.6
Trade balance as % of GDP: 17.2%
Federal budget balance as % of GDP: 0.6%
The city-state’s tax and regulatory environment have made it a competitor to Hong Kong as an Asian center for finance. Advantageous trade routes, balanced budgets and high levels of individual wealth have insulated the nation from major disturbance due to volatility in the financial markets.
Overall rank: 5
GDP per capita: $28,500
GDP, real growth rate: 0.6%
Population (millions): 4.2
Trade balance as % of GDP: -1.3%
Federal budget balance as % of GDP: 0.4%
Tiny island nation has embraced free trade policies, recently becoming the first developed nation to sign a free trade agreement with China.
Big movers included New Zealand (No. 5, up seven spots), followed by Jordan (No. 33, up 28), Australia (No. 8, up five), United Arab Emirates (No. 46, up 28) and Malaysia (No. 25, up 13).
This is not a tally of economies with high gross domestic product growth, or low unemployment. The goal is to quantify for entrepreneurs and investors the often-qualified information about dynamic economies and what they would consider desirable conditions for business.
Personal freedoms play a big part–it’s hard to start a company or find talented employees under totalitarian regimes and military juntas. So we include measures of the right to participate in free and fair elections, freedom of expression and organization.
Taking care of investors, with laws assuring recourse for minority shareholders in cases of corporate misdeeds, is also important. As a barometer for corruption, Transparency International examines the number and frequency of incidents where corporate assets are misused for personal gain.
Amid the financial turmoil this year, we added stock market performance to reflect the extent of disrepair in countries’ banking systems, as well as investor confidence in a recovery. Intellectual property rights, the promotion of free trade and low inflation, combined with low taxes on income and investment, give a snapshot of the conditions for business in each.
All was not lost in a tough year for believers in low taxes, free trade and limited bureaucracy. Despite swelling budget deficits, at least 50 countries recently cut or passed plans to cut taxes on individuals and businesses, including eight of the top 10, with individuals and investors in the U.S. and Norway left in the lurch.
The United Arab Emirates, in particular, has made strides in protecting intellectual property rights through initiatives like educational seminars for thousands of students, with support from corporations like Procter & Gamble (nyse: PG – news – people ), Estée Lauder (nyse: EL – news – people ) and General Motors (nyse: GM – news – people ). New Zealand improved its free-trade ranking by pursuing talks with India, Korea and Hong Kong, while securing the first (for a developed nation) free-trade deal with China late last year. Infrastructure improvements to the Jordanian stock market are improving enforcement of investment laws and compliance by broker members.
Sliding the most this year was Ireland (No. 14, down 12), which even saw plans for a Guinness mega-brewery shelved by parent Diageo (nyse: DEO – news – people ) as exports slowed. Uruguay (No. 66, down 22), Armenia (No. 94, down 31), Paraguay (No. 99, down 29) and Latvia (No. 45, down 13) rounded out this year’s losers.
Expertise, research and published reports–from the Heritage Foundation, World Economic Forum, World Bank, Transparency International, Freedom House, Deloitte Tax, the U.S. Chamber of Commerce and Central Intelligence Agency–all contributed vital analyses of various socioeconomic indicators on the countries included.