According to the World Economic Forum-sponsored report, Botswana is now ranked 66 out of 134 countries, down from 56th position it attained last year.
The country's macroeconomic stability index fell from 22 last year to 41 this year, making it the worst drop among the 12 pillars used to measure a country's competitiveness performance against its peers globally.
"That is a great fall because Government saw its revenues depleted as the global downturn affected the diamond industry to the extent that some mines had to be closed," a consultant with the Botswana National Productivity Centre (BNPC), Letsogile Batsetswe, said at the launch of the report on Tuesday.
The overall score for the country during the period under review was 4.08 points, resulting in it moving from 3rd to 4th in regional rankings.
Tunisia remains the leading competitive African country, followed by South Africa. Botswana was dethroned from position three by its perennial alternating challenger for that position for the past five years, Mauritius.
Globally, Switzerland has toppled the US, which has been badly impacted by the downturn from, position one to become the leading competitive nation out of the 134 countries.
Poor work ethics in the national labour force continues to be highlighted as the most problematic factor of doing business in Botswana.
The Global Competitiveness Report, which is done in conjunction with the BNPC, also found that the country has an inadequately educated workforce, access to financing is a challenge and inefficient government bureaucracy ranks forth among problematic factors.
Batsetswe said when narrowing Botswana's competitiveness edge against South Africa, Mauritius, Singapore and the US, the country is not doing well in infrastructure development. This is so despite Botswana being ranked 46 in the world in terms of quality of overall infrastructure and quality of roads.
In the infrastructure index, Botswana fairs badly when it comes to quality of air transport and available seat kilometres, which is third from last year at 131.
The low rate of secondary and tertiary enrolment, made worse by this year's controversial freeze on government sponsorship by the Ministry of Education, resulted in Botswana losing points significantly. Thus the country this year ranks 115 in tertiary enrolment.
Botswana also continues to perform poorly on labour market efficiency, health and primary education, technological readiness and innovation. Batsetswe said the country also lacks behind South Africa and Mauritius because of market size.
"We are doing poorly on market size because we are unable to penetrate foreign markets," he said.
Botswana, however, performed exceptionally well in the institutions index, which has pillars like judicial independence, property rights, public trust in politicians and wastefulness of government spending.
Giving a keynote address at the launch of the report, the Managing Director of Caratex, Tally Tshekiso, said it was the opportune time to discuss competitiveness in the midst of the global economic recession.
He said he was aware that the report was usually met with a lot of enthusiasm in respect of country ranking positions, but he called upon businesses and policy makers to look beyond such short-term euphoria.
"As a nation, we must confront head-on all impediments to economic performance and be counted along as part of the solution to the global economic meltdown," Tshekiso said.
He said while Botswana may derive comfort in the fact that its ranking position had risen in the past two years, the reality was that it was still many miles from that initial position when the country entered the race.
When the country was first included in the competitiveness report, it attained position 36. Its position in subsequent years was 45th in 2004/5, 48th in 2005/6, 81st in 2006/07, 76th in 2007/08 and position 56 in 2008/9.
"In all honesty, this is a red signal to policymakers to be proactive in their response," Tshekiso said.