The UAE has fallen two places in the World Economic Forum's ranking of the most competitive countries.
The emirates was 27th this year, compared with 25th in last year's Global Competitiveness Report.
The study, released yesterday, pits countries against each other on 12 "pillars" including education, health, infrastructure, labour market efficiency and financial market development.
"The drop reflects deterioration in a number of areas, but the most striking is the country's loss of its ability to harness the latest technologies for productivity improvements," the report says.
Elsewhere in the Gulf, Qatar was 14th, three places higher than last year; Saudi Arabia ranked 17th, up four places; Oman placed 32nd; and Kuwait 34th. Bahrain - a new entrant to the list this year - ranked 37th.
All of the Middle Eastern countries affected by unrest this year fell in the rankings, with Egypt down 13 places to 94th and Tunisia falling eight notches to 40th.
Top of the list was Switzerland, followed by Singapore and Sweden.
While it fared worse than last year, the report says the UAE's relatively high ranking among 142 countries "reflects the high quality of its infrastructure, where it ranks a very good 8th, as well as its highly efficient goods markets".
World Economic Forum (WEF) researchers also cited "strong macroeconomic stability" and "high government efficiency" as advantages, while pointing to the UAE's struggles during the global financial crisis as a continuing challenge.
"The resulting reorientation of the country's development model will demand solid foundations in competitiveness and a continuation of competitiveness-enhancing structural reforms to reduce the risk of asset bubbles and put economic development on a more stable footing," the report says.
A source close to the reporting process said the decline in the UAE's ranking was due partly to a change in the survey criteria and inaccuracies in data. The survey, for example, used a population figure twice the size of the WEF's own estimate when measuring mobile phone users per capita, the source said.