KOF Globalisation Index: the Netherlands overtakes Switzerland as the most globalised country in the world

Economic globalisation declined slightly in 2019. The trade dispute between China and the United States acted as a decisive influencing factor. In the United States it led to higher costs for manufacturers, higher prices for consumers and financial difficulties for farmers. In China the trade dispute contributed to a slowdown in economic and industrial output growth, which was already declining. The economic environment for the globalisation of world trade therefore deteriorated in particular.

Negotiations over the UK’s exit from the EU in 2019 (completed in January 2020) are also likely to have had an adverse impact on economic globalisation. The full impact of Brexit should be more apparent in the next version of the Index for 2020. However, globalisation is supported by the increase in international financial interconnectedness. The levels of external debt of low- and middle-income countries and foreign direct investment remained similar year on year. The synchronous downturn in the global economy therefore means that these factors account for a larger share of gross domestic product.

Social globalisation has decreased somewhat. In particular, the degree of interpersonal globalisation, i.e. the degree of cross-border personal contacts, has declined. The degree of political globalisation was slightly higher than in the previous year. The number of embassies and NGOs has thus increased recently.

Country overview

The most globalised countries in the world continue to be the trio of Switzerland, the Netherlands and Belgium. In contrast to the last two years, the Netherlands is this year’s leader, replacing Switzerland in this position. The differences between the three leading countries in recent years have been minimal. All three countries have high foreign trade ratios and strong financial sectors. The three countries play a significant role politically and are therefore a focal point for many international non-governmental organisations and institutions. The Netherlands is particularly characterised by a very high degree of economic globalisation. Firstly, this is due to its role in the trade of goods via the ports of Rotterdam, where most goods in Europe are shipped. And, secondly, the Netherlands, like Switzerland, is a financially attractive location for companies and the financial sector. Brexit is also likely to have given a boost to the Netherlands to the detriment of the UK.

Outlook for the future

As the index data only extends to 2019, the impact of the coronavirus crisis that emerged in 2020 is not yet included in the latest KOF Globalisation Index. Generally, however, KOF expects to see a decline in international trade during the coronavirus pandemic. “We expect to see economic activity dip during the COVID-19 pandemic year of 2020 in particular. We also saw a decline in trade during the financial crisis. The crucial question is what happens afterwards,” said KOF Director Jan-Egbert Sturm.