Figures released on Tuesday showed that the economy grew at an annual rate of just 1.5% in the January to March period, well down on the 2.4% registered in the October-December quarter, and far short of the predicted 1.8% expansion.

Combined with suggestions last week that inflation estimates are to be revised downards, the weak growth figures make an interest rate cut more likely when the Reserve Bank of South Africa holds its next rate-setting meeting on 11-12 June.

"This is strongly supportive of an interest rate cut in June" from the current level of 13.5%, said John Loos, senior economist at ABSA.

That market expectation of lower rates is a perfectly reasonable one Ian Plenderleith, Reserve Bank deputy governor

"We're looking at a 100 basis point cut" to 12.5%, he added.

And the Reserve Bank's deputy governor, Ian Plenderleith, further reinforced expectations of a cut in borrowing costs at a breakfast hosted by Investec, the investment bank.

"That market expectation of lower rates is a perfectly reasonable one," he said. "The uncertainty lies in the timing and the profile of that."

Economists are looking at overall growth for 2003 of 2.5%, well down on last year's 3%, and just half the 5% that investment bank Goldman Sachs believes is required to make a dent in the 30% official unemployment rate.

Volatility

South Africa's growth prospects have suffered because of the two-year downturn in the global economy.

The country's problems have been exacerbated by the extreme volatility of its currency, the rand.

A 38% plunge in the rand's value against the dollar in 2001 - partly because of the perceived risk of instability spreading from neighbouring Zimbabwe - triggered a surge in inflation and caused a four percentage point rise in interest rates last year.