South Korea's global competitiveness ranking fell by one notch this year, as the country suffers from an expanding fiscal deficit, a report showed Tuesday.

Korea ranked 28th in terms of global competitiveness among 64 countries surveyed, according to the 2023 report by the International Institute for Management Development.

Korea’s ranking in government efficiency came down to No. 38 this year, moving two places down from 2022.

The Switzerland-based international institution has released the annual report since 1989, evaluating competitiveness of each nation based on its economic achievements, infrastructure, and government and corporate efficiency.

The criteria evaluate the fiscal sustainability, efficiency of tax policies and more.

Under the government efficiency criteria, Korea’s ranking for public finance moved down eight rungs to No. 40, dragged down by the slip in performance in the government budget balance to GDP ratio, total general government debt to GDP ratio and the real growth of total general government debt.

According to the Finance Ministry, the national debt-to-GDP ratio climbed from 37.6 percent in 2019, 43.6 percent in 2020, 46.9 percent in 2021 and to 49.6 percent in 2022.

The country's fiscal shortfall has been increasing at a fast clip. The government expects the fiscal deficit to reach 58.2 trillion won ($45.4 billion) this year.

“Worsening fiscal balance and growth of national debt affected the evaluation,” an official from the Finance Ministry explained at a press briefing for the report held Monday.

“As the government has decided to suppress the rate of increase of the national budget at the most, this will be improved in the future,” the official said.

The report delivered some good news. In terms of economic achievements, Korea saw its ranking move up eight places to No. 14, the highest ever. The previous record was set at No. 15 in 2015.

Under the economic achievements criteria, apart from the evaluation on international trade falling 12 spots to 42nd place due to slow exports, all other areas showed improvement.

Korea's ranking for economic achievements moved up largely due to stabilized prices and a favorable labor market. Inflation in Korea has cooled down, with its consumer prices increasing by 3.3 percent on-year in May, nearing the Bank of Korea’s target rate set at 2 percent.

Korea also maintained its spot at 33rd for corporate efficiency and at 16th in infrastructure.

“The foremost agenda is to improve government efficiency which led to the drop in national competitiveness,” the Finance Ministry official said.

“We will work for sound fiscal management through the legislation of fiscal rules and renovation of the public sector, increasing the efficiency of the government.”

Meanwhile, Denmark topped the list this year, maintaining the top spot from last year. Ireland moved up to second place, followed by Switzerland, Singapore and the Netherlands.

Among the 14 nations in Asia and the Pacific, Korea ranked seventh this year, down one notch from a year earlier. China came in at 21st, while Japan marked 35th.