Switzerland's economy is expected to grow by 1.3% this year, the government said on Wednesday, significantly below the country's long-term average as industry struggles with weak demand abroad and a strong Swiss franc.
The forecast was a slight upgrade from the previous expectation for growth at 1.1%, but still lower than Switzerland's long-term average growth rate of 1.7%.
The State Secretariat for Economic Affairs (SECO) also cut its growth forecast for 2024 to 1.2% from the 1.5% expectation it gave in June.
The tepid growth in one of Europe's more resilient economies is expected despite strong consumer demand at home and growth in the service sector.
"After a buoyant start to the year, Switzerland's economy stalled in the second quarter," SECO said. "The industrial sector recorded a decline in both investments and value added.
"Current indicators do not signal a trend reversal in the months ahead," it added.
The negative outlook follows grim news from the mechanical and electrical engineering sector, which recorded a 9.6% drop in new orders in the first six months of 2023.
The forward looking Purchasing Mangers Index has also languished below the crucial 50 level for expansion every month this year.
SECO said the rise in the value of the Swiss franc and weaker global demand were hurting goods exports.
It also highlighted weakness in the euro zone, Switzerland's most important export market, a situation it expects to continue.
"All in all, the global economy is likely to take longer to recover from the challenges of the past few years than was assumed in the June forecast," SECO said.
"Monetary policy will continue to dampen growth, as core inflation worldwide again proves more persistent than expected."
The Swiss National Bank and a host of other central banks are meeting this week, and are expected to hike rates to tackle stubborn inflation. (Reporting by John Revill; Editing by Himani Sarkar)