UPDATE 2-Brazil economy staging solid 'V-shaped' recovery, job growth strong - Guedes

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BRASILIA, Oct 29 (Reuters) - Brazil’s economy is undergoing a strong “V-shaped” recovery marked by very strong job growth, Economy Minister Paulo Guedes said on Thursday, adding he is confident Congress will continue to support the government’s economic reform agenda.

In public testimony to a congressional COVID-19 committee, Guedes also said welfare programs will be reduced as the pandemic recedes and that the government must return to fiscal responsibility next year.

The government’s “plan A” is to reduce transfers to the poor as the economy recovers and the virus recedes, but it will act just as decisively if there is a second wave of the virus as it did to combat the first, Guedes said.

Economic reforms and reducing the deficit will help free up funds to deal with a second wave, he said, adding the Federative Pact reform bill on state and federal finances should have a clause for a “State of Calamity” off-budget spending, like this year.

A second wave, however, would “substantially” reduce the fiscal space to respond which is why tackling the deficit, cutting taxes and regulation is so crucial, he said.

Business and investor confidence in Brazil hinges on economic and fiscal reforms, and as long as they remain ill-defined and not approved a sense of uncertainty will persist, he said.

He agreed with the central bank’s view on inflation that the recent spike in food prices is transitory, and said more central bank transfers of currency-related profits to the Treasury could help reduce debt along with spending cuts and privatizations.

“We will bring down debt-to-GDP, with even more energy,” Guedes said, noting that government debt is on course to hit a record high close to 100% of gross domestic product this year.

Guedes again advocated sweeping payroll tax cuts and exemptions to boost job creation, and repeated his support for some form of digital tax as more business, banking and commerce migrate online.

However, he ruled out privatization of the public health care system known locally as “SUS”, as had been reported recently in local media.

“I can assure you that we have never considered privatizing SUS. That would be insanity,” Guedes said. (Reporting by Jamie McGeever Editing by Alison Williams and Marguerita Choy)