The growth of 1.4% of Gross Domestic Product (GDP) in the first quarter of 2025 surprised part of the market for the resilience of the Brazilian economy, even in the face of a scenario of high interest rates, but the expectation is that there will be slowdown in the next readings.
HAS CNNEconomists said that the lower elevation of economic activity should go through the weight of the contractionist monetary policy in the labor market and in the service sector, which have still been firm by the recently released data.
“We are feeling a restrictive squeeze at this time, after we surpassed neutral interest. We will most likely see a weaker second trimester and possibly a negative quarter,” said Way Investimentos chief economist, Alexandre Espírito Santo.
Monetary policy takes, on average, 6 to 9 months to take effect – which therefore makes it natural that there is a lag in the indicators. Thus, economists say the moment is of migration to a more restrictive economic activity.
“The job market is supporting consumption, because agro, although very strong, does not have such a significant weight in GDP. The economy support is coming from services and consumption, which changes from now on. We should see a reduction in this consumption and a worsening in the job market,” he added.
Espírito Santo estimates the second quarter GDP close to 0.5% and, in the last 2025, mild retraction.
In an interview with CNN Moneyformer São Paulo Farm Secretary and Warren Investimentos Chief Economist Felipe Salto said that credit and demand should have already cooled, which shows a surprising result of the 1st quarter GDP.
“The data is still very strong, all still show a relatively high temperature. It does not have a strong deceleration face as we already expected to happen in the early 2025,” said Salto.
Still, the path to slowdown is imminent, in the view of the former secretary of the farm of São Paulo.
“But the tendency is that over the months this slowdown should happen, it must probably be happening now in May, because monetary policy is quite restrictive and this produces a discouragement of credit, consumption and investment,” he added.
Inter’s chief economist, Rafaela Vitória, points out that the strength of agriculture should continue pulling the Brazilian economy in the next reading, but the effects of monetary policy will press more the other indicators.
“Agro’s performance should still contribute in the 2nd quarter, but we expect a tendency to slow down demand, both in investments and family consumption,” he said.
“The slowdown of demand is important at this time for interest to fall and the growth of supply, besides agro, can resume,” he concluded.
