South Africa?s economic growth accelerated in the first quarter of 2006, led by a sharp rebound in the manufacturing sector, official data showed yesterday, but not strongly enough to trigger a rate hike in the near term. Africa?s largest economy expanded 4.2 percent on a seasonally adjusted and annualised basis, quickening from a revised 3.2 percent in the fourth quarter of 2005, Statistics South Africa said. The figure was in line with expectations.

Growth was again driven by the demand side of the economy because of a low interest rate environment. Analysts said it was unlikely that overall growth for 2006 would match last year?s expansion of 4.9 as predicted by the National Treasury. Many expect growth to average 4.5 percent this year. ?The numbers strengthen the case for unchanged interest rates. The growth pace is not overly strong,? said Pieter Laubscher, an economist at the Bureau for Economic Research. ?The interest rate picture is changing, but we are not looking for drastic action on rates fairly soon ... if anything towards the end of the year or early next year.?

The Reserve Bank?s monetary policy committee (MPC) meets on June 7-8 and is widely expected to leave the main repo rate steady at 7 percent, after gradually reducing it by 6.5 percentage points between 2003 and 2005. Prime lending rates are at 10.5 percent ? their lowest in more than two decades ? fanning strong domestic demand, which is driving economic growth.

Gross domestic product (GDP) growth in the first quarter was hoisted by a strong recovery in the manufacturing sector, which expanded 4.3 percent after contracting 0.3 percent in the fourth quarter. The sector accounts for 16.4 percent of GDP.

Manufacturing comes to the party

The momentum was also spurred by strong showings in the construction, finance and real estate sectors. But the mining sector remained under pressure, contracting 2.9 percent after shrinking 5.4 percent in the fourth quarter. Analysts blamed the sector?s woes on relative rand strength during the period and a delayed reaction to the global economic slowdown in the first half of last year.

But the rand?s 3.6 percent fall against dollar so far this year and surging gold and platinum prices has raised hopes for the sector?s recovery later this year. It was trading about 4.5 cents weaker at 6.56 dollar yesterday.

Growth estimates for the second, third and fourth quarters of 2005 were slightly revised downwards to reflect adjustments to monthly production and sales figures for the mining sector after new data from the government. On an unadjusted basis, Africa?s biggest economy grew by 4.0 percent compared to the first quarter of 2005, versus a revised 4.4 percent in the fourth quarter and forecasts for a 4.3 percent increase.

The government wants to raise growth to 6 percent by 2010 as it attempts to create jobs and halve poverty. Unemployment is officially estimated at 26.7 percent and is seen as a major source of social instability. Data released by the central bank on Tuesday showed a modest slow down in money supply growth and credit demand in April, but the underlying trend remained strong.

?The risk for an early rate hike is quite high. Hopefully it can be averted and postponed to early 2007, but we will not be surprised to find the MPC pulling the trigger as early as next month,? said Johan Rossouw, economist at Vunani Securities.

Low interest rates have culminated in household debt jumping to a record 65.5 percent as a percentage of disposable income in the fourth quarter of 2005 from 63.5 percent in the third quarter.

A South Korean court has sentenced the founder of the Daewoo group to 10 years in prison and forfeited 21.4 trillion won ($22 billion) for fraud and embezzlement in the country?s biggest financial scandal. Kim Woo-choong, 69, had turned Daewoo into the second-largest conglomerate in the country before fleeing in 1999 as his empire was collapsing under more than $75 billion in debts.

The Seoul Central District Court yesterday found him guilty of fraud in securing bank loans, fabricating financial accounts to falsify assets and embezzlement of company funds. The court also ordered him to pay a 10 million won criminal fine.