The Alpine country came ahead of Singapore, the United States, Germany and the Netherlands in the global competitiveness report for 2015-2016 issued by the WEF on Wednesday.
Japan ranked sixth, ahead of Hong Kong, Finland, Sweden and the UK among the 140 countries surveyed.
Guinea ranked as the least competitive country, ahead of Chad and Mauritania.
Switzerland scored best in the world for innovation “thanks to its world-class research institutions, high spending on research and development by companies and strong cooperation between the academic world and the private sector,” the report said.
The country had many other factors in its favour, including having the highest level of business sophistication and the most efficient labour market, featuring the highest level of collaboration between workers and employers.
Also helping Switzerland were its effective and transparent public institutions (ranked sixth in the world) and excellent infrastructure and “connectivity” (also ranked sixth).
The report said these strong fundamentals explain why the Swiss economy has remained resilient throughout the crisis that has hit Europe.
But Switzerland faces “downside risks” that include the sluggish recovery of its key trading partner countries, the appreciation of the Swiss franc and uncertainty about future immigration, which could undermine its capacity to tap global talent.
“Switzerland must continue to sharpen its competitive edge to justify the high cost of doing business in the country,” the report added.
According to the WEF figures, Switzerland's GDP per capita of $81,323.96 (based on 2013 data) was well ahead of any of the other countries in the top ten, with the US a distant second at $53,101.01.
Overall, the report said that “despite substantive efforts to re-ignite recovery, global economic growth remains low and unemployment persistently high”.
The WEF called for structural reforms to improve productivity to break out of the “new normal”.
It said that the most competitive countries fare better during difficult economic periods than uncompetitive ones.
For example, it said that Switzerland has since 2007 experienced only a mild recession in 2009 and its jobless rate has remained around three per cent.
By comparison, Greece, ranked 81st for competitiveness, has seen its economy shrink by 25 percent over the same period, while its unemployment rate remains above 20 percent.
Check here to read the full report.