The United States, which was tied with Hong Kong in last year's World Competitiveness Yearbook, slipped to second place while Switzerland moved up to third from fifth.
"Despite all its setbacks, the US remains at the centre of world competitiveness because of its unique economic power, the dynamism of its enterprises and its capacity for innovation," said IMD.
The report found emerging economies are not yet immune to turmoil elsewhere, with China (23), India (35) and Brazil (46) all slipping in the rankings, while Russia (48) climbed only one place.
All Asian economies declined apart from Hong Kong, Malaysia (14) and South Korea (22). Singapore slid to fourth place from third, Taiwan to 7th from 6th, Australia to 15th from 9th, and Japan to 27th from 26th.
Latin America also had a tough year, with every nation falling except Mexico (37).