Two of the world’s largest wealth management hubs – Hong Kong and Singapore – retained first and second places respectively as the world’s freest economies, although globally, overall economic liberty fell, according to an annual survey by the UK-based Institute of Economic Affairs and Canada’s Fraser Institute.

The report warned that the recession and subsequent moves by some governments to tighten regulations and hike taxes will reduce overall economic liberty, repeating the pattern of some policies enacted in the US and elsewhere in the 1930s. Global economic freedom experienced its first global downturn in a quarter of a century, with the average score falling to 6.67 in 2008 (the most recent year for which data is available) from 6.74 in 2007. Of the 123 countries with economic freedom rankings dating back to 1980, 88 (71.5 per cent) saw their rankings decrease while only 35 (28.5 per cent) recorded increases.

When measured according to metrics such as size of government, taxes, legal systems, property rights, free trade, soundness of monetary system and regulations, Hong Kong came out with a total score on a possible range of 0 to 10 of 9.95, while Singapore scored 8.7. In 2007, Hong Kong and Singapore scored 8.97 and 8.66 respectively.

In third place, meanwhile, was New Zealand (8.27); Switzerland (8.08); Chile (8.03); the US (7.96); Canada (7.95), Australia (7.9), Mauritius (7.82), and the UK (7.81).

While they typically focus on legal and economic freedoms rather than political ones – which might give a slightly different overall ranking – the figures are suggestive iof which nations are seen as providing the most friendly climate for business and finance. As the data was based on 2008 data and events, it may have to be revised following the regulatory and tax changes that have taken place in a number of countries, such as the US.

At the very bottom of the rankings, in 141^st place, is Zimbabwe, at just 3.57, the report said.

“As the world confronted financial instability and economic decline in 2008, the mean economic freedom rating fell for the first time in several decades. As we mentioned in last year’s report, the world now faces a situation similar to that of the Great Depression. During the 1930s, perverse economic policies transformed a normal cyclical downturn into a decade-long era of hardship and suffering. The length and severity of the Great Depression were the result of a sharp monetary contraction, imposition of trade restrictions, higher taxes, increases in government spending financed with debt, price controls, and uncertainty created by constant policy changes that were supposed to hasten the end of the crisis,” the report said.

The rankings and scores of other large economies include Taiwan, 22nd (7.48); Germany, tied with Japan and Kuwait in 24th (7.46); France, 35th (7.32); South Korea, tied with Sweden in 37th (7.28); Spain, tied with Iceland and Honduras in 39th (7.26); Italy, tied with Montenegro and Poland in 66th (6.90); Mexico, 69th (6.89); China, tied with South Africa in 82nd (6.65); Russia, 84th (6.62); India, tied with Croatia and Moldova in 87th (6.51); Brazil, tied with Madagascar in 102nd (6.18); and Argentina, 114th (5.59).