Finance Minister Trevor Manuel's Medium-Term Budget Policy Statement reaffirmed the economy was in good shape and that growth projections may be revised upwards, Absa Group Economic Research said on Tuesday.

It also bodes well for tax cuts next year. "The upwards revision of government's revenue target confirmed that economic growth was exceeding expectations," the unit said in a statement.

One concern, however, was the capacity of municipalities to spend their allocated funding.

"Much closer co-operation with the private sector in terms of management and project planning skills will be required to salvage the mess that has developed in some municipalities.

"Contracting of targets and outputs with managers, stipulating clear penalties and rewards, have become a necessity at all tiers of government, including local authorities," Absa said.

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SA's official statistics body produces a number of key indicators, including monthly inflation and quarterly GDP figures, unemployment and population counts.

ECONOMY UPDATE Business expectations remain positive Manufacturing output up 6.2% Retail sales increase Pension fund assets exceed R1-trillion Business confidence at record high Net reserves climb to $18.7bn Govt to spend R372bn on infrastructure Jan house price growth at 14.9% Interest rates unchanged Strong new vehicle sales Manufacturing hit by strong rand SA hotels boost occupancy levels Economic growth creating jobs Producer inflation rises Inflation dampens rate cut hopes