Thailand's ranking in the Global Competitiveness Index (GCI) 2016-17 has dipped two places to 34th from last year.
The report is an annual assessment of the factors driving productivity and prosperity in 138 countries. The degree to which economies are open to international trade in goods and services is directly linked to both economic growth and a nation's innovative potential.
Switzerland tops the list for the eighth consecutive year, narrowly ahead of Singapore and the US.
Following them is the Netherlands and Germany. The latter has climbed four places in two years. The next two countries, Sweden and the UK, both advanced three places, with the UK's score based on pre-Brexit data. The remaining three economies in the top 10 -- Japan, Hong Kong and Finland -- all moved backwards.
In East Asia, large emerging markets such as Malaysia dropped out of the top 20, falling seven places to 25th, while Indonesia dropped four places to 41st and the Philippines fell 10 spots to 57th.
A consistent theme for all of the region's developing countries including Thailand is the need to make inroads into the complex areas related to business sophistication and innovation if they are to break out of the middle-income trap. The report said while basic drivers of competitiveness such as infrastructure, health, education and well-functioning markets will always be important, data suggests a country's technological readiness, business sophistication and innovation is now as important in driving competitiveness and growth.
Thailand's strength is a greatly improved macroeconomic environment thanks to a better government budget balance and percentage of gross national savings. Areas of concern include health and primary education, as the latter fell 19 places to 86th, while higher education and training dipped six places to 62.
The report also found the degree to which economies are open to global trade in goods and services has been declining for a decade based on a rise in non-tariff barriers, burdensome customs procedures, rules affecting FDI and foreign ownership.