The world's largest economy, which was placed 5th last year, fell two positions to the 7th spot - marking its fourth year of decline.

A lack of macroeconomic stability, the business community’s continued mistrust of the government and concerns over its fiscal health were some of the reasons for the downgrade, according to the annual survey.

"A number of weaknesses are chipping away at its competitiveness...the U.S. fiscal imbalances and continued political deadlock over resolving these challenges," said Jennifer Blanke, Economist at the Geneva-based WEF.

Political deadlock over reducing the unsustainable federal government budget deficit – projected to hit $1.1 trillion this year – prompted Standard & Poor’s to downgrade the country’s credit rating by one notch toAA+ from AAA last August.