Hong Kong has been crowned the world’s most competitive economy for the second year running, ahead of Switzerland and Singapore, by the International Institute for Management Development.

In its latest annual report, the Swiss business school ranked Hong Kong first out of 63 economies based on four indicators: economic performance; government efficiency; business efficiency; and infrastructure.

Switzerland placed second, followed by Singapore. The Lion City overtook the United States, which placed third last year.

Hong Kong topped the rankings on two indicators – government efficiency and business efficiency.

Hong Kong trails rival Singapore in Asian Competitiveness report for third year running

However, the city’s economic performance, based on trade, investment and employment, took a beating to drop from fifth to 11th place. Its ranking for infrastructure, which includes an assessment of infrastructure in technology, science, education, health and the environment, improved slightly, moving up from 21st to 20th place.

Financial Secretary Paul Chan Mo-po said the report was a “clear recognition” of Hong Kong’s “favourable business environment and robust financial system”.

“In light of the fierce competition in the global economic arena, we must strive to uphold our prevailing competitive edge, including the open and free market principle, the fine tradition of the rule of law, an efficient public sector and a robust institutional framework,” he said.

The institute has consistently ranked Hong Kong among the three most competitive economies since 2013, except in 2014, when the city placed fourth.

In the Asian region, the mainland saw the biggest improvement, climbing seven places to rank 18th, on its “dedication to international trade” and “improvement in its government and business efficiency”.

But Hong Kong did not fare so well in a separate ranking, also published by the institute, on the ability to adopt and explore digital technology, and success in transforming government practices, business models and society. The city placed seventh, losing out to Singapore, Sweden and the US in the top three.

Hong Kong slips two spots in global competitiveness index, while Singapore still leads Asia-Pacific

Chinese University academic Terence Chong Tai-leung warned Hong Kong could risk losing its competitive edge if rankings placed more weight on indicators such as business costs and political climate.

“The cost of doing business in Hong Kong is more expensive compared with other countries, especially in rent,” he said. “The political atmosphere in general has also taken a turn for the worse, so these are also likely factors that could pull Hong Kong down in other rankings.”