UPDATE 3-Brazil's GDP weaker than expected in Q4 as farm exports slip

(Adds Finance Minister quote)

SAO PAULO, March 1 (Reuters) - Brazil's economic recovery was weaker than expected in the fourth quarter due to fluctuations in agricultural exports, data showed on Thursday, indicating a gradual but more widely dispersed recovery in Latin America's largest economy.

Gross domestic product grew 0.1 percent from the prior three months, according to the government statistics agency IBGE, shy of the 0.4 percent median estimate in a Reuters poll of economists.

On an annual basis, GDP grew 2.1 percent in the quarter, below the 2.5 percent average estimate.

For the full year, Brazilian GDP grew 1 percent in 2017, slightly below median estimates of 1.1 percent.

"Growth is taking shape. It is more widely spread among economic sectors and that improves its quality," said Roberto Padovani, chief economist at brokerage Votorantim, pointing to improved capital spending as a sign of business confidence.

Gross fixed capital formation grew 2 percent in the fourth quarter, above the 1.8 percent growth in the third quarter.

Padovani said the weak figures should calm analysts who were overly optimistic about prospects for economic growth in 2018. Votorantim was keeping its estimate of 3.2 percent growth this year, he said.

"It is clearer that the recovery is gradual," Padovani said.

Finance Minister Henrique Meirelles told a news conference that short-term fluctuations in the harvest had impacted the fourth-quarter growth figures, but Brazil's agricultural sector remained on track for record crops this year.

He said the 1 percent growth last year was what the government expected. "Brazil is not in recession any more: that's what is important" he said.

Brazil's lowest interest rates on record, low inflation and the start of a recovery in employment have helped private consumption. The data showed that household consumption grew 1 percent last year, after a 4 percent fall in the previous year.

Meirelles said Brazil's economy, worth some $1.8 trillion, was still on track to grow 3 percent this year.

Rebeca Palis, coordinator at the IBGE statistics agency, said the fourth-quarter numbers suffered due to the negative result of foreign trade, particularly smaller agricultural exports.

"Exports were affected by a stronger real and also by the unwinding of an earlier jump in agricultural exports reflecting bumper harvests," she said.

In a note to clients, Neil Shearing, chief emerging markets economist at Capital Economics, called the trade results "the first sign that the strength of the real is becoming a problem for Brazilian producers."

The real was trading at around 3.26 to the dollar on Thursday, roughly in its range of the past year and a half. (Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro and Marcela Ayres in Brasilia; Editing by Daniel Flynn, Will Dunham and David Gregorio)