However, a bounce is expected as soon as 2013, when gross domestic product is forecasted to expand to 1.9 percent, an improvement on September's forecast of 1.5 percent.
"Due to the poor economic situation of the European Union and its impact on the Swiss export economy," the Swiss economy ministry forecast a sharper slowdown in 2012 than earlier expected.
"The economy should gradually restart from the second half of 2012 and show a growth of 1.9 percent in 2013," it added.
Domestic consumption as well as exports are expected to drive demand. In particular, record low interest rates and demographic growth are seen favouring the construction industry.
The Swiss central bank is scheduled to issue its growth forecast on Thursday. Its latest estimate indicated growth of between 1.5 and 2.0 percent for 2011.