UPDATE 1-Brazil showing clear signs of rebound -finance min

* Finance minister - economy shows clear signs of recovery

* Says additional fiscal, monetary stimulus required

* Mantega says sees more leeway for rate cuts (Recasts, adds quote and details throughout)

BRASILIA, June 9 (Reuters) - Brazil's economy is showing clear signs of economic recovery though it requires additional fiscal and monetary stimulus to ensure growth this year, Finance Minister Guido Mantega said on Tuesday.

Data earlier on Tuesday showed Brazil's economy shrank 0.8 percent in the first quarter from the previous one, much better than the 2.6 percent contraction expected by economists in a Reuters survey. Gross domestic product contracted 1.8 percent year-on-year in the first quarter, less than analysts had expected.

The economy has shown a quick turnaround thanks to resilient domestic demand and vigorous government spending, Mantega said. Additional stimulus in the form of interest-rate reductions and tax breaks might be required to revive the economy, he said.

"We will need to make a lot of effort so that we can achieve a positive GDP this year. The government will have to implement monetary policies and anti-cyclical fiscal policies to stimulate growth," Mantega told a press conference.

Mantega's remarks indicate the government will keep using the budget to stave off what might become the worst recession in at least two decades. President Luiz Inacio Lula da Silva's administration has deployed more than $40 billion in state credit since the intensification of the global credit crisis in September, while the central bank has trimmed borrowing costs to an all-time low.

Brazil's economy shrank 3.6 percent in the last quarter of 2008 and is widely expected to contract 0.7 percent this year, according to the latest central bank survey of local financial institutions after above 5 percent growth in 2008.

And his comments come one day before the central bank is widely expected to slash interest rates by at least 75 basis points, according to a Reuters survey published last week.

Mantega also said he saw room for the benchmark Selic rate to fall further without affecting domestic savings returns.

The central bank has cut interest rates by 350 basis points to 10.25 percent so far this year, prompting worries there would be a flight of cash from investment funds to tax-free savings accounts as interest rates fell. (Reporting by Isabel Versiani; Writing by Ana Nicolaci da Costa; Editing by James Dalgleish)