South Africa has entered a period that will test its fortitude as a nation and the ability to protect the gains that have been made, said President Kgalema Motlanthe on Friday.

"We have had over four years of fairly rapid economic growth when we were able to add hundreds of thousands of new jobs annually ... When the incomes of ordinary South Africans grew four percent a year on average, and when government was able to increase its expenditure, especially on social services, by nearly 10 percent a year," he said addressing members of the National Council of Provinces in Lady Frere, Eastern Cape.

Motlanthe said the country's living standards had been steadily improving as it steadily but surely chipped away at the scourge of unemployment.

He said in the midst of this growing optimism, a sudden black cloud had descended on the world economy, posing a threat to the gains SA had made.

An international financial crisis had recently erupted, pushing many parts of the world's economy into a slowdown, with especially some highly industrialised countries expecting very low growth or even the shrinking of their economies.

"In South Africa we have had to lower our expectations too, not because our own financial sector is threatened; it is not," Motlanthe said.

He said the country's financial institutions had been scrutinised, they had been tested.

"And they had passed those tests with flying colours."

Motlanthe said in South Africa it has been a slowdown off a secure base with sound fundamentals, unlike in some other countries where the cutbacks had been catastrophic.

"We are not going to enter a recession, and indeed we expect our economic performance to be better than that of many of our peers."

Sapa