For the 2014-2015 ranking Latvia climbed from 52 to 42 and fell back to 44 in 2015-2016.
Lithuania ranked 35th in this year's ranking - one up from last year - while Estonia remained 30th.
The index compares countries by 12 criteria, including: institutions, infrastructure, the macroeconomic environment, health care, education, market efficiency, technological readiness, business environment, market size, and innovation.
Switzerland, followed by Singapore and the USA topped the list.
In addition to the 12 'pillar' criteria, entrepreneurs also evaluated what they think cause the greatest difficulties when starting business in Latvia.
"The main problems in Latvia stressed by Latvian entrepreneurs for 2016-2017 are (in an order of priority): tax rates, ineffective government bureaucracy and tax regulation, followed by approach to funding, unstable policy making, corruption and an uneducated workforce," said Arnis Sauka, director of the SSE Riga Center for Sustainable Business, responsible for preparing Latvia's entry in the report.
The report is published by the World Economic Forum, a not-for-profit foundation headquartered in Switzerland.
