The country fell one place to fifth while the USA climbed two places to third. Switzerland was designated most competitive country for the sixth time in a row, followed by Singapore, while Finland was Eurozone champion in fourth place.
WEF economists rank countries according to their scores on twelve “pillars”, including institutions, business sophistication and innovation, size and quality of finance, goods and labour markets, technological readiness, infrastructure, health and education.
“These are really the set of institutions, policies and factors that determine the level of productivity of a country,” WEF economist Caroline Galvan told The Local.
For example, the study authors pointed to Germany's stand against aggression by Russian President Vladimir Putin in Ukraine as one contributor to the fall, hitting the “market size” pillar after Russia blocked imports of some German goods.
While Germany has many strengths, it must not allow itself to rest on its laurels, Galvan said. It has work to do to tackle inflexibility and over-regulation that have placed it 55th in the table for least burdensome government.
Labour market flexibility is a particular priority the WEF observers highlighted. Germany scores low on wage flexibility and hiring and firing practices, but it has a strong system that can be used to address the problem.
“What is very important when you look at the whole labour market issue is strong co-operation between the private sector and civil society, the workers," Galvan noted. And Germany does "really well on co-operation, labour-employer relations - this is very positive."
Another factor starting to hold the country back is the need to ensure its labour pool is up to the challenges of the 21st century. Germany was 25th worldwide in the WEF's quality assessment of higher education.
“Other countries are always rapidly moving ahead and so you cannot be complacent,” said Galvan. “You need workers that can cope with the demands of a fast-growing, innovative economy.”
And the country can do more to make sure that it's using all of the potential available to it, particularly that of women.
“Germany is doing very well on on-the-job training, they're very well renowned for their apprenticeship system, which is emulated worldwide, but you still do see that women are not fully integrated into the labour force” Galvan said.
The country only achieves 45th place in global rankings for female participation, with nine women in work for every 10 actively working men.
The good news is that Germany continues to score highly for its honest and efficient public and private institutions and excellent transport infrastructure.
It boasts sophisticated, innovative businesses with access to large domestic and foreign markets.
And its people have access to the latest technology and are in excellent health compared with most countries in the world.
All this is a sound basis for Germany to shoot for an even better place next year.