What is external competitiveness?

External competitiveness refers to a country's ability to compete with other countries in international markets. It is a measure of how well a country's economy is performing in comparison with other economies. External competitiveness is often measured by the real exchange rate, which is the value of a country's currency relative to the currencies of its trading partners. A high real exchange rate indicates that a country's currency is overvalued, which makes its exports more expensive and its imports cheaper. This can lead to a trade deficit and a decline in economic growth. A low real exchange rate, on the other hand, indicates that a country's currency is undervalued, which makes its exports cheaper and its imports more expensive. This can lead to a trade surplus and an increase in economic growth.

There are a number of factors that can affect a country's external competitiveness, including:

* Labor costs: The cost of labor is a major factor in determining a country's external competitiveness. Countries with lower labor costs are more likely to have a competitive advantage in industries that are labor-intensive.

* Capital costs: The cost of capital is another important factor in determining a country's external competitiveness. Countries with lower capital costs are more likely to have a competitive advantage in industries that are capital-intensive.

* Natural resources: Countries with access to natural resources, such as oil and gas, can use these resources to their advantage in international markets.

* Technology: Countries that are at the forefront of technological innovation are more likely to have a competitive advantage in industries that are technology-driven.

* Government policies: Government policies can also affect a country's external competitiveness. Policies that promote free trade, for example, can help to increase a country's exports and improve its trade balance.

External competitiveness is an important factor in determining a country's economic growth. Countries that are more competitive in international markets are more likely to experience sustained economic growth.