THE SOUTH AFRICAN economy is holding up well despite the slowdown in world growth and the effects of the attacks on the US and ensuing war in Afghanistan, according to finance minister Trevor Manuel. In his medium term budget, Manuel said “our trade performance in the first nine months of 2001 has remained impressive, government revenue has grown strongly and there has been a recovery in capital spending. Although we now expect growth of 2.6 per cent this year - down from our February Budget estimate of 3.5 per cent - we expect South Africa to avoid the dislocation that many other emerging economies are presently experiencing. Indeed, South Africa's healthy balance of payments, declining inflation and sound public finances allow us to propose fiscal policy adjustments that will sustain and reinforce the momentum of our growth and development. The MTBPS reaffirms Government's firm intent to address our social and development challenges within a consistent, growth-oriented fiscal and budgetary framework.” Manuel said key features of South Africa’s economic performance include: Growth of 10.4 per cent in merchandise export volumes in the first half of this year compared with the same period in 2000, while services exports grew by some 15 per cent over the same period; a decline in the net open forward position of the Reserve Bank - representing uncovered future claims on foreign exchange reserves - from US$9,5 billion in January to US$4,8 billion in September; steady growth in most sectors of the economy this year, and particularly in wholesale and retail trade, financial services and the transport, storage and communications sectors; an improvement in domestic investment across a broad range of industries, including real growth in both public and private sector capital formation; a “modest” recovery in domestic saving, accompanied by an encouraging reduction in household debt relative to incomes; steady declines this year in both producer and consumer price inflation. Manuel announced that the country’s inflation target would remain an annual average increase of between three and six per cent in CPIX (consumer price inflation minus mortgage rates) in 2003. For the 2004 and 2005 year, the target will be three to five per cent.