ROME, Oct 7 (Reuters) - Italian industry lobby Confindustria on Monday confirmed its forecast of flat economic growth in 2019, rising slightly to 0.4% in 2020, assuming the government avoids an increase in sales tax scheduled for January.
"The Italian economy is still on the threshold of zero growth, risking a fall into recession in the event of new shocks," Confindustria said announcing the forecast.
It cut its deficit forecast for this year to 1.8% of gross domestoc product and to 2.8% in 2020, without a VAT increase.
Under an unchanged policy scenario, which includes the tax hike worth some 23 billion euros ($26 billion), next year GDP would remain flat and the deficit would fall to 1.7%, Confindustria said.
The new government of the anti-establishment 5-Star Movement and the centre-left Democratic Party has promised to avoid an increase in VAT because it would hurt already weak household spending and domestic demand.
Last month the government reduced its 2019 growth forecast to 0.1% from +0.2% previously. Growth next year is targeted at 0.6%, helped slightly by tax cuts to be included in the budget.
The deficit of the euro zone's third-biggest economy is targeted to remain stable at 2.2% of national output both in 2019 and in 2020. (Reporting by Giuseppe Fonte, editing by Crispian Balmer)