Singapore has dethroned Hong Kong to become the world’s freest economy, according to a report released by Canadian think tank Fraser Institute.

For the first time since the Economic Freedom of the World Index started in 1970, Hong Kong slipped to second place from the number one spot — and its score is about to drop even further.

Some of the tenets used to gauge economic freedom index are measured based on ease of international trade, freedom to enter and compete in markets, as well as business regulations, amongst other yardsticks.

The findings in the 2023 report are based on data from 2021, the most recent year with available comparable statistics across the 165 jurisdictions. It measures the economic freedom of individuals — or their ability to make economic decisions on their own.

“Hong Kong’s recent turn is an example of how economic freedom is intimately connected with civil and political freedom,” said Fraser Institute’s senior fellow, Matthew Mitchell, in a press release.

New regulatory barriers to entry, increasing cost of business, and limits on employing foreign labor dented Hong Kong’s ranking, the report stated.

“These repressions, combined with the government’s efforts to control the private sector, inevitably led to diminished economic freedom. Hong Kong’s prosperity will likely suffer as a result,” Mitchell said.

In 2020, China imposed a national security law in Hong Kong which critics slammed as a curtailment of the city’s autonomy. Under the new legislation, crimes of secession and sedition are punishable by up to life in prison.

Singapore climbed to the top spot from second place the previous year.

“Driven by improvements in its size of government and regulation components, Singapore’s overall score rose 0.06 points to take the top ranking,” the report stated.

Switzerland, New Zealand and the U.S. occupy the third, fourth and fifth positions respectively.

Other notable mentions include the United Kingdom coming in sixth, while Japan and Germany claimed 20th and 23rd place respectively.