As an investor, or a potential one, you may be disheartened by the many gloomy messages in the media about the financial markets. Although industry experts have different views, some say the investment environment is not as bad as it is painted.

Old Mutual Investment Group (OMIG) economist Johann Els, at an Old Mutual conference for investment managers in Cape Town last week, said the South African economy is not as dismal as it seems, and we must not allow the political turmoil and credit ratings downgrades to blind us to the positive aspects, which include better global growth having a knock-on effect on South African growth, an improvement in South Africa’s current account balance, the possibility of a lower budget deficit, lower inflation, and a turn in the interest rate cycle.

And although our currency, the rand, remains vulnerable to political events, it is much firmer than it was at the end of 2015, mainly because of better prospects for emerging- market economies.

On the international front, Els noted the following positives:

• An upturn in global gross domestic product (GDP) growth;

• Commodity prices. Although they have come off the highs they achieved in the second half of 2016, commodities, such as gold, platinum, coal and iron ore, are still strong compared with their lows at the end of 2015;

• Global purchasing managers’ indices, which reflect conditions in the manufacturing and service sectors, are positive;

• Economic growth in the United States is positive, despite a slowdown in the first quarter of this year, and fears of deflation are subsiding;

• A stronger-than-expected Europe, resulting in a slightly weaker US dollar, which is good for commodity prices and emerging markets; and

• Although GDP growth is slowing in China, a slump is not expected, and the country’s finances are more stable.

Els said there was room to be optimistic about the South African economy, particularly in the short term, because:

• The uptick in the global economy is having a positive effect on ours.

• Exports are picking up, while imports are slowing.

• There have been higher crop yields, following better rainfall in the major crop-growing areas. “Even if the non-agricultural economy does not grow, the agricultural recovery could lead to 0.5% total GDP growth this year,” Els says. Some growth outside of agriculture is also expected; thus OMIG expects GDP growth at about 1.2% in 2017.

• Consumers, while still under pressure, are slowly unburdening themselves of their debt. Household debt as a percentage of household income has fallen, from about 85.7% at the end of 2008 to 74.4% at the end of 2016.

• Inflation is coming down – it fell to 5.3% in April – and, for at least the next year, is expected to remain within the range of 3% to 6% targeted by the South African Reserve Bank.

• Lower inflation marks a turn in the interest rate cycle. OMIG expects one 25-basis-point cut this year and possibly two cuts next year..

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