Singapore retained its position as the second freest economy in the world for the 22nd consecutive year but slipped further back from perennial rival Hong Kong.
Its 87.8 score on the Index of Economic Freedom was just 0.8 point shy of the Chinese financial hub. Last year, the margin was 0.2 point.
Even though economic growth has slowed here, the country's "openness to global trade and investment continues to provide a solid basis for economic dynamism", said the report published by the Heritage Foundation and the Wall Street Journal.
"A transparent regulatory environment, buttressed by well-secured property rights, provides commercial security for the innovative and resilient private sector."
Singapore Management University law don Eugene Tan, a former Nominated MP, said Singapore's score dropped primarily because of lower marks for regulatory efficiency and freedom from corruption. "But it should be noted that the qualitative remarks on both counts are, however, positive," he added.
"Our approach to regulatory efficiency is not entirely aligned to the index's methodology and criteria of economic freedom. For instance, the report states: 'There is no statutory minimum wage, but wage adjustments are guided by the National Wage Council. The Government influences prices through state-linked enterprises and can impose price controls as it deems necessary.'
"Therein lies the challenge of improving our scores - how do we reconcile what works for us with the economic methodology and beliefs that underpin the index?" he asked.
Nonetheless, Mr Tan said the index is still useful: "We don't live by rankings but we can learn from these surveys to see how we can improve Singapore's political economy."
The United States rose to 11th place this year from 12th last year but its economic freedom score dropped 0.8 point to 75.4. "Following declines in seven of the past eight years, the United States this year has equalled its worst score ever in the Index of Economic Freedom," the report said.
"Ratings for labour freedom, business freedom and fiscal freedom have flagged notably, and the regulatory burden is increasingly costly."
China's global ranking sank to 144th from 139th last year, as "deep-seated structural problems, including a continued over-reliance on public investment and exports for growth, a state-controlled financial sector and regulatory inefficiency have become more acute", it said.
Rounding off the top five freest economies were New Zealand in third spot, followed by Australia and Switzerland, while Venezuela, Cuba and North Korea were at the bottom of the list.
This article was first published on Feb 3, 2016.
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