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2.3 Factors that determine international competitiveness

Factors influencing international competitiveness:

• Relative Inflation - If the inflation rate in your country is relatively lower than in other countries, you will
become more competitive over time.

• Exchange Rate - Exchange rate movements have an impact on competitiveness, for example, if there is
a sharp depreciation, export is cheaper and more competitive.

• Productivity - Thanks to better technology and education, labour productivity is increased and thus it is
possible to produce goods at lower costs.

• Cost of Doing Business - Some countries have higher costs and less competitiveness. This is due to
greater regulation in the labour market.

• Tax Rates - Higher taxes on labour will increase unit labour costs, leading to reduced competitiveness.

• Tariffs and non-tariff barriers - one of the key factors that affect international competitiveness.

• Infrastructure - One of the decisive factors determining a company’s competitiveness is transport costs.