Canada rose two positions to 15th place on the business competitiveness index released by the World Economic Forum, putting it in the upper echelons of 117 countries but far behind the United States.
In this year's ranking, the United States is No. 1 on the index followed by Finland, Germany, Denmark and Singapore.
The index is designed to measure the set of institutions, market structures and economic policies supportive of high national prosperity.
On the growth competitiveness index, which estimates the underlying prospects for growth over the next five to eight years, Canada also improved, rising one position to 14th.
In that index, Finland placed first, for the third year in a row, followed by the United States, Sweden, Denmark and Taiwan.
"These indices help Canadians understand how we are faring in comparison with our global competitors," said Roger Martin, chairman of the Institute for Competitiveness and Prosperity, said in a statement.
The institute is the Canadian partner in compiling the list and an affiliate of the University of Toronto's Rotman School of Management, where Martin is dean.
"In 1998, Canada stood sixth in (the business competitiveness) ranking and by last year we had fallen to 15th, so a move up two spots to 13th in 2005 may be the start of a turnaround," Martin said.
He noted, however, that Canada fell further behind the United States in important factors such as the intensity of local competition and the sophistication of customer buying processes.