MILAN (Reuters) – The Italian economy will grow more than expected in 2022 but will stagnate in 2023, the country’s main business lobby said on Saturday, warning that tensions between the European Union and Russia over gas supplies made the outlook highly uncertain.

In a report Confindustria downgraded its expectation for GDP growth in 2023 to zero, from 1.6% forecast in April, while revising its estimate for 2022 to 3.4% from 1.9% thanks to the Italian economy’s excellent performance in the first half year.

The 2023 downgrade echoes government projections and comes after Mario Draghi’s outgoing administration last week slashed its growth forecast for next year to 0.6%, due to sky-high energy costs. Still it said GDP would expand 3.3% in 2022, up from 3.1% forecast in April.

The lower forecasts for next year underscore the economic headwinds facing Giorgia Meloni, who led a right-wing alliance to victory in elections last month and is expected to be named prime minister this month.

“If tensions between the EU and Russia were to escalate to such an extent as to lead to further price jumps and/or the blocking of gas supplies, the negative effects on production activity would be more severe, implying a more pronounced recession,” Confindustria said in its report.

Moscow and several European countries, including Germany, have been at loggerheads over the supply of natural gas from Russia since the country invaded Ukraine in February.

Russian gas now accounts for only around 10% of Italian gas imports, down from around 40%, while the share from Algeria and the Nordics has increased.

(Reporting by Gianluca Semeraro; Editing by David Holmes)