Korea has taken a step backward in terms of global competitiveness.
The World Economic Forum, in its annual report, placed Korea 26th in the world, a spot lower than last year.
It's the nation's lowest ranking since 2004.
The finance ministry pinned the slide to April's deadly ferry disaster, which has dented domestic spending, and Pyongyang's continued missile launches.
While the report touted Korea's macroeconomic environment, its infrastructure and technological advances as positives, it said the nation's institutions, development of the financial market and labor market efficiency fell well below the global average.
The most problematic factors, the report said, were policy instability, government inefficiencies and tax and labor regulations.
The annual report evaluates 144 global economies based on 12 different categories.
The rankings at the top remained rather stable this year.
Switzerland was number one for the sixth consecutive year, followed by Singapore and the United States.
The report notes that the growth prospects in advanced economies are better than they have been in recent years while emerging economies are forecast to grow more modestly than they have in the past.
Song Ji-sun, Arirang News.