Brazil's economy is expected to have recorded stronger growth in the first quarter than in the final three months of 2025, driven by a firmer industrial sector and a recovery in services, according to the median result of a Reuters poll of 24 analysts conducted between May 20 and May 25. The panel's central estimate puts gross domestic product growth at 1.0% in January-March versus the previous quarter, with the year-on-year rate likely at 1.8%.
The October-December period registered a modest expansion of 0.1% quarter-on-quarter and 1.8% year-on-year. Official GDP data for the first quarter are scheduled for release on Friday.
Analysts point to a stronger manufacturing performance as a key change from recent quarters, with additional contributions from the services sector - notably commerce, professional services and household-focused activity - supported by a healthy labour market.
"Growth is expected to be qualitatively better than in recent quarters, with less marked performance from agribusiness and greater momentum in industry," said Rodolpho Sartori, an economist at Austin Rating. "The quality of growth is better because the industrial sector generates more sectoral linkages in the economy and employs more people than agribusiness."
A central bank leading economic indicator released earlier this month indicated 1.3% growth in the first quarter compared with the prior three months, although a sharper-than-expected contraction in March signalled weaker conditions toward the end of the quarter.
Within industry, the automotive subsector is expected to have posted robust results in the first quarter, in part because truck production rose following the launch of government-backed loans aimed at vehicle buyers.
Energy exports also featured in the forecast: an oil boom that has nearly doubled Brazil's oil exports remained an important factor heading into the period just before the start of the U.S.-Israeli war with Iran, which has drawn additional attention to Latin American supply.
On the demand side, economists at Santander wrote that household consumption should have firmed, reflecting strong employment and income conditions and potential effects from recent government stimulus measures. Those measures include a consumer debt relief programme and income tax breaks among other steps intended to support consumption despite a still-restrictive monetary stance.
Policy remains a balancing act. The central bank has cut interest rates this year, but officials maintain a tight approach overall amid persistent inflationary pressures, geopolitical uncertainty and caution related to Brazil's presidential election in October. This cautious stance likely weighed on capital spending during the quarter.
"Investment, despite showing signs of improvement at the margin, should recede in annual terms... (although) partially supported by a low comparison base and the import of oil platforms," Santander's analysts wrote, adding that they continue to expect GDP growth of 1.9% in 2026. They also noted that the recent announcement of new fiscal, quasi-fiscal and credit measures increases the upside bias to that projection.
Market participants and policymakers will be watching the forthcoming official GDP release for confirmation of the poll's central estimate and for detail on the sectoral composition of growth, especially industry, services and investment dynamics.
Key data points referenced in this report:
- Median Reuters poll estimate: 1.0% quarter-on-quarter GDP growth in January-March 2026.
- Yearly GDP rate in the poll: 1.8%.
- October-December growth: 0.1% quarter-on-quarter and 1.8% year-on-year.
- Central bank leading indicator: 1.3% quarter-on-quarter growth for Q1, with a contraction in March.