South Korea's global competitiveness ranking fell by four notches this year due mainly to sluggish economic performance and business efficiency, an international institute said Tuesday.

According to the 2016 report by the International Institute for Management Development, South Korea ranked 29th in terms of global competitiveness among 61 countries surveyed.

IMD is a Swiss-based institute that releases competitiveness rankings every year based on a country's economic achievements, infrastructure, and government and corporate efficiency. It has been issuing the report since 1997.

In terms of economic achievements and infrastructure, South Korea placed 21st, down six notches from a year earlier, as the country's economic growth contracted to 2.6 percent last year from the previous year's 3.3 percent expansion.

Corporate efficiency tumbled by 11 notches as a toxic humidifier scandal dealt a huge blow to the country along with on-going corporate restructuring issues. As a result, the country's labor market, entrepreneurial attitude and management practices received lower ratings from the IMD assessment.

The humidifier disinfectant case, one of the worst scandals involving a consumer product using chemicals, is rocking the country as the state prosecution has been intensifying the investigation into the product maker, Oxy Reckitt Benckiser. Some 220 people are confirmed to be killed from the poisonous substances.

In the government efficiency sector, however, South Korea rose to 26th from 28th, marking the first ranking upgrade in three years. The IMD gave higher scores for public finance and fiscal policies.

"The poor rating may be attributable to a slowdown in the economy and employment, corporate restructuring issues and corporate ethics problems," the finance ministry said in a release.

IMD suggested that the South Korean government carry out structural reforms in the business and labor sectors and map out plans to boost domestic demand and create jobs for the young generation, according to the ministry.

Meanwhile, Hong Kong topped the list in terms of global competitiveness for 2016, relegating the former No. 1 United States to the third place after Switzerland.

Among Asian countries, China fell to the 25th spot from 22nd and Japan rose one step to 26th, while Singapore and Taiwan placed fourth and 14th, respectively.

On the other hand, South Korea rose to the fourth position at the World Bank's Doing Business index last year, the highest ranking that Asia's fourth-largest economy has ever received.

The index measures a country's business climate in terms of corporate regulations for starting a business and dealing with employment, taxation and other administrative procedures.

Insiders pointed out that the World Bank study gave higher points to South Korea as it is fully based on statistics and legal analysis, while the IMD report, that also covers the macroeconomic and government sectors, puts priority on surveys on businesspeople rather than on numbers.

"The IMD's global competitiveness ranking is a result of assessments of broader areas, but it is easily affected by the social and economic situation and atmosphere of the country when the surveys are conducted," said an official from the finance ministry. (Yonhap)