Brazil’s economy is expected to have regained momentum in the first quarter of 2025, driven by a surge in household spending and private investment, according to a Reuters poll of economists conducted from May 21–26.
Buenos Aires, May 29, 2025 (Reuters) — Brazil’s economy is expected to have regained momentum in the first quarter of 2025, driven by a surge in household spending and private investment, according to a Reuters poll of economists conducted from May 21–26.
After slowing to 0.2% quarterly growth in Q4 2024, Brazil’s gross domestic product (GDP) likely expanded by 1.4% in the January–March period, according to the median forecast of 19 analysts. On an annual basis, the economy is projected to have grown 3.2%.
The rebound reflects a resilient labor market, government credit incentives, and strong agricultural output, particularly in soybean exports to China, which buys roughly 70% of its soy imports from Brazil.
“The resilience of the labor market and the government’s incentive measures during the period continued to drive greater consumption,” wrote economists at Kinitro Capital.
Key Growth Drivers
Household Consumption: Boosted by a strong job market and new payroll-deductible loan schemes, personal spending increased despite persistently high interest rates.
Capital Expenditure: Investment in equipment and infrastructure also contributed positively in Q1.
Agriculture: A bumper soybean crop underpinned growth in the supply sector, with China remaining Brazil’s primary export destination for the oilseed.
Weighing Factors
While domestic demand surged, the external sector weighed on GDP, with imports growing faster than exports. Industrial output and services expanded, though both underperformed expectations due to the drag of elevated borrowing costs.
Brazil’s benchmark interest rate remains near a 20-year high, a consequence of the central bank’s efforts to curb inflation. This hawkish monetary stance is expected to restrain economic expansion later in the year.
Outlook for 2025
Despite Q1’s strong showing, economists warn of headwinds in the second half of 2025. The Brazilian government recently revised its full-year growth forecast upward to 2.4%, while Barclays projects a more cautious 2.1%, citing tighter financial conditions and a challenging global environment.
Still, some analysts argue that government stimulus and continued labor market strength may offset external risks. Measures such as workers’ severance fund withdrawals, expanded housing programs, and state-backed loans are expected to sustain domestic demand.
Brazil’s official Q1 GDP figures are scheduled for release on Friday, which will provide a clearer picture of the country's economic trajectory in a year marked by both recovery and restraint.
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