Switzerland’s government has made a significant cut to its economic growth forecasts, noting mounting risks from a “tense energy situation and sharp price increases.”

The government now forecasts the economy to grow 2.0% in 2022, down from the prediction made in June for 2.6% growth.

Next year, Switzerland’s economy is forecast to grow by 1.1%, according to the State Secretariat for Economic Affairs (SECO), a move down from the prior forecast of a 1.9% rise.

The figures have been adjusted to take out the impact of major sporting events, Reuters reports.

"After a positive first half of the year 2022, the Swiss economy now faces a deteriorating outlook," SECO stated. "A tense energy situation and sharp price increases are weighing on economic prospects, especially in Europe."

SECO has increased its inflation forecast for Switzerland, adding it predicted consumer prices to increase by 3% this year and 2.3% in 2023. Previously, the State Secretariat for Economic Affairs has forecast inflation of 2.5% in 2022 and 1.4% in 2023.

Earlier in September, three of the leading economic institutions in Germany lowered their forecasts for the country’s economy – the largest in Europe - in 2023, expecting soaring energy prices stemming from the war in Ukraine to weigh heavy.

Whereas Switzerland, which is not as reliant on Russian gas and seen considerably lower inflation than the eurozone, has traditionally been one of Europe’s stronger economies.

SECO added that positive unemployment figures in Switzerland, with a forecast jobless rate of 2.2% in 2022 and 2.3% next year, would continue to boost domestic demand.

Nevertheless, foreign demand is forecast to weaken, particularly from the U.S., China and the eurozone, more than previously predicted.

In addition, SECO said the overall outlook for Switzerland’s economy was predominantly down to the global economy and the development of the energy supply situation, the Reuters report adds.