Switzerland’s economy stagnated in Q2 with zero growth as the slowdown overseas impacted the manufacturing sector and goods exports, according to a government statement.

Adjusted for income from sporting events, the 0% growth in GDP between April and June declined from a 0.9% increase in the first quarter and also fell short of the 0.1% growth rate forecast in a Reuters survey.

The predominant reason for the slowdown was manufacturing, which registered a 2.9% contraction in output, as Switzerland’s chemical and pharmaceutical industry recorded a decline.

“The challenging international environment is weighing on the cyclically sensitive industrial sectors such as mechanical engineering and metal construction, resulting in a second-quarter decline in value added for the rest of industry,” according to the State Secretariat for Economic Affairs (SECO).

In addition, the downturn was also seen in a widespread decline in goods exports throughout several countries and categories, SECO went on to say.

Businesses also showed more caution, with investment in equipment down 3.7% in Q2 compared to the first three months of the year, with reduced spending on IT, research and development and vehicles, Reuters news agency reports.

“Switzerland cannot decouple itself from the weak economic development in neighbouring European countries,” stated VP Bank economist Thomas Gitzel.

“As a small, open economy, Switzerland is far too dependent on the wealth and woe of other countries,” he continued, adding that he forecasts the country’s economic growth to stay around zero for the remainder of the year.

However, Swiss private consumption remained strong in Q2, increasing 0.4%, with additional spending on healthcare, food and accommodation.

Compared to 2022, Switzerland’s economy grew by 1.1% in Q2, SECO added.

Furthermore, the government said back in June it anticipates the Swiss economy to grow by 1.1% in 2023, followed by 1.5% growth in 2024.