(Adds Temer and finance minister comments)
By Anthony Boadle and Lisandra Paraguassu
BRASILIA, Nov 8 (Reuters) - President Michel Temer said on Tuesday he expects Brazil’s economy to emerge from a severe recession in the second half of next year, later than expected by most economists.
He added Brazil, Latin America’s largest economy, is making strides toward restoring business confidence and recovering the investment grade credit rating that it lost last year.
Addressing the powerful industrial lobby CNI, Temer said chopping Brazil’s budget deficit and pulling the economy out of recession “takes time.”
“Our hope is that we will not have negative growth in the second half of 2017,” Temer told the conference on building and financing infrastructure, adding that high unemployment, with 12 million Brazilians out of work, would start to fall then too.
Brazil’s recession has lasted two years, marking the economy’s deepest downturn since the 1930s.
Economists widely expect the economy to start growing again in the first quarter of 2017
Based on recent data, the industrial sector shows signs of stabilizing and corporate investments have started to pick up. Consumer and business confidence have risen off record lows.
Temer, who took over in August when his leftist predecessor as ousted in an impeachment trial, said his center-right government is seeking to increase the private sector’s role in modernizing infrastructure.
He urged Congress to approve a federal spending cap this year, to be followed by a reform of the costly pension system in 2017 to restore fiscal discipline.
Finance Minister Henrique Meirelles, speaking after Temer, said public spending had reached unsustainable levels under previous governments and Brazil was only now, for the first time, tackling its biggest problem of spending more than it earned.
Meirelles said the pace of economic recovery would depend on business confidence. He said the government was strengthening regulatory agencies to improve the business climate as it looks for private investment to rebound.
Temer said renewed confidence since he stepped in to replace Dilma Rousseff has improved the chances of Brazil recovering its investment grade.
Temer noted that the spread on Brazil’s five-year credit default swaps, a measure of investor perception of credit risk, had narrowed considerably over the past six months. (Reporting by Anthony Boadle, Lisandra Paraguassu and Leo Goy; Editing by Daniel Flynn, Chizu Nomiyama and W Simon)