Germany, Brazil look to economic recovery later this year

Brazil's central bank will issue a formal forecast for the country's economy soon, but it could take three more months to be able to assess the impact of the coronavirus crisis.

By REUTERS
An employee places a sign as she prepares to reopen a shop in the district of Prenzlauer Berg after a partial end of the lockdown imposed to slow the spread of the coronavirus disease (COVID-19) in Berlin, Germany April 18, 2020. Sign reads: "Please keep your distance! 1,50 meters to the next person (photo credit: CHRISTIAN MANG / REUTERS)
An employee places a sign as she prepares to reopen a shop in the district of Prenzlauer Berg after a partial end of the lockdown imposed to slow the spread of the coronavirus disease (COVID-19) in Berlin, Germany April 18, 2020. Sign reads: "Please keep your distance! 1,50 meters to the next person
(photo credit: CHRISTIAN MANG / REUTERS)
Germany may be able to manage the fiscal impact of the coronavirus crisis without exceeding approved debt levels if the economy recovers in the second half of the year, Finance Minister Olaf Scholz said in an interview published on Sunday.
Parliament suspended a debt brake to fight the crisis on March 25 with a supplementary budget of 156 billion euro ($169.67 billion), 100 billion euros for an economic stability fund that can take direct equity stakes in companies, and 100 billion euros in credit to public-sector development bank KfW.
The measures were predominantly aimed at funding healthcare and helping companies.
Asked if 156 billion could remain the top level of new debt, Scholz told the Welt am Sonntag newspaper: "If we manage to move the economic curve upwards again in the second half of the year, then this could be the case."
He said that Germany would aim to recover the outlays over a long-term period without having to make substantial savings elsewhere.
He praised the country's social welfare system of capitalism that makes a high level of state support possible, but added this meant there could be higher taxation of top earners after the crisis.
A demand by his Social Democratic party in a coalition government led by Chancellor Angela Merkel's conservatives, he said such taxation needed to be "fair and just," supporting lower income groups as well.
The government package further includes a stability fund of 400 billion euros in loan guarantees to secure corporate debt at risk of defaulting, taking the overall sum to more than 750 billion euros.
Scholz said that he would aim to provide economic stimuli, if necessary, after the end of the current lockdown policy that keeps businesses shut and the population at home.
"When it is the right time, we will get measures on their way to stimulate business again," he said. "Those will have to be as economists would imagine them - targeted, fit for purpose and limited in time.
"Also, we will keep our eyes fixed on the modernisation of our country, such as through the reduction of carbon dioxide emissions, the expansion of electric mobility, or digitisation."
He said the government was also looking into support measures for hotel and restaurant owners.
Meanwhile, Brazil's central bank president Roberto Campos Neto said on Saturday that Latin America's largest economy will begin to recover from the coronavirus crisis in the fourth quarter, according to an interview in local media.
Brazil has more coronavirus cases than any other country in Latin America. On Saturday, the health ministry said the number of confirmed cases rose by 2,917 to 36,599. Deaths rose by 206 to 2,347, the ministry said.
"I think the last quarter will show improvement," he said in the interview with website Poder360, which has published a teaser but will publish the interview in full on Sunday.
"Now the question is the third quarter, to what extent will it be impacted."
Brazilian President Jair Bolsonaro has repeatedly dismissed the severity of the coronavirus outbreak and criticized social isolation guidelines, arguing that the economic toll will kill more people than the virus.
On Saturday, he repeated this argument in Brasilia, meeting with a small crowd of protesters on the streets and broadcasting the encounter on Facebook Live.
He said that Brazil's federal government will be expected to compensate states more than 100 billion reais ($19.09 billion) in tax revenue lost due to lockdown policies that have negatively affected the economy. But Bolsonaro said there is no room in the country's budget to afford those costs.
Campos Neto added that the central bank will issue a formal forecast for Brazil's economy soon, but that it could take some three more months to be able to formally assess the impact of the coronavirus crisis on the Brazilian economy.