The UAE fell from the world's top 10 most competitive countries, ranking at 12 this year.
The annual ranking, conducted by IMD, a business school in Switzerland, looked at 60 countries on a range of variables – social, economic, demographic - that relate to a country's overall economic performance.
Still the top country in the Middle East for competitiveness, the UAE beat out Qatar by one place.
Among contributing factors to the decline of the Emirates in the ranking, experts said that lower oil prices as well as rivals investing more in health care and education hit the Gulf country hard.
According to the most recent IMF data, the UAE spends 1.1 percent of its GDP on education, which is far less than the average of more than 12 percent spent by OECD countries.
It is also the kind of education that is prioiritized, according to the recent study.
“People in the Gulf tend to choose education paths that will help them to gain jobs in the public sector,” William Jackson, an emerging markets economist at Capital Economics, told The National. “But it tends to be the private sector where you get productivity increases that drive innovation and sustainably raise living standards.”
The United States topped this year's list, followed by Hong Kong, Singapore, Switzerland and Canada.