World Economy

Weaker productivity growth hits global economy: WEF

WEF: Global economy is in a new normal

Countries across the world are suffering from a shortfall in productivity growth that is weighing on economic expansion, according to the World Economic Forum (WEF)'s annual report on global competitiveness.

The forum said that world economic growth was not on track to recover to the heights seen before the global financial crisis of 2007/08. On top of this, WEF warned that uncertainty surrounding a slowdown in emerging markets, in particular China, could disrupt the world's growth trajectory.

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"Rather than adjusting to this new normal, countries must step up their efforts to re-accelerate economic growth. There is evidence that, in addition to lower capital accumulation that results from reduced investments, productivity over the past decade has been stagnating and even declining," said authors led by WEF's executive chairman, Klaus Schwab, in the report.

"Increasing productivity therefore needs to be at the core of the policy agendas of governments and international organizations."

As it does every year, the report ranked countries by their relative competitiveness, factoring in governmental institutions and policies as well as the efficiency of the labor market and financial markets. It also considered other facets such as business sophistication and innovation.

Switzerland and Singapore held onto the two top places in the 2015-and 2016 rankings and the U.S. stayed in third place.

Major strengths that helped keep the U.S. competitive included its cutting-edge business sector, substantial market size and innovation, WEF said. However, it added that the country should be savvy of risks to competitiveness, in particular the appreciation of the U.S. dollar and the much-speculated about end to record-low interest rates.

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Most countries in the top ten in 2014 maintained their ranking this year. Notable changes include Finland, which dropped four ranks to eighth place, and Netherlands, which rose three levels to fifth place, bolstered by its education and infrastructure sectors. However, the U.K. fell to tenth place from ninth.

WEF said the U.K. has helped develop London as the "epicenter of the European tech and start-up scene," with a talented workforce. However, WEF labeled the U.K. government's high deficit and the public debt as problem areas.

It added that a weaker euro – helped by the European Central Bank's decision to start quantitative easing this Spring – and a drop in energy prices has helped offset these concerns about sluggish growth in the euro zone.

China has been another hot topic in recent months, with financial markets reaching volatile extremes over concerns about the country's economic outlook. Despite this turbulence, the country managed to retain its WEF competiveness ranking of 28th place.

At the other end of the ranking, 15 of the 20 worst performing countries were from Sub-Saharan Africa, including Sierra Leone, Chad and Guinea at the bottom.

WEF’s top 10 for competitiveness, 2015-2016:

  1. Switzerland
  2. Singapore
  3. United States
  4. Germany
  5. The Netherlands
  6. Japan
  7. Hong Kong
  8. Finland
  9. Sweden
  10. United Kingdom

—By CNBC's Alexandra Gibbs, follow her on Twitter @AlexGibbsy.