Sunday, August 7, 2022

Investec’s Mr. Optimistic says world is healing, economies have bottomed

Investec Asset Management has painted a bullish outlook of global economy describing 2013 as the year when the recovery began, shrugging-off shutdown fallout in the United States and near default on debt that threatened to take the world economy down.

Jeremy Gardiner, Director at the asset management outfit, which manages about US$ 107 billion for clients around the world, said in Gaborone this week that the global economy is over the worst as recovery is gaining traction.

“There are encouraging signs that the world is healing and that economies have bottomed. Compared to 18 months ago, the economic numbers ÔÇô and hence the newspaper headlines ÔÇô are ll improving,” said the man the South Africa media call Mr. Optimistic.

“Interestingly, this is more the case in the developed world. The emerging world is still suffering the economic aftershocks of the recent withdrawal of investor flows, as well as the emotional trauma that comes with that,” said the charismatic Gardiner.

In the U.S where the global economic recession emanated from mortgage crisis, Gardiner added the world’s largest economy is ‘in good state despite the shutdown’.

“The US is recovering rather well economically, but politically leaves much to be desired. The political impasse, driven by their debt situation, is in many ways understandable,” he said.

“……the US is in relatively good shape. The housing market is recovering and, unlike their government, US consumers have managed to deleverage and are now able to borrow again. Banks are lending, delinquencies are at record lows, consumer confidence is at 6-year highs and finally, after four consecutive deficits in excess of a trillion dollars per annum, this year’s shortfall will only be around $650 billion. This number will keep declining going forward”.

Their debt to GDP ÔÇô around 107 percent and rising by about 2 percent a year ÔÇô was 98 percent in 2010 and 66 percent in 2006. Put differently: it is up from about $4 trillion in 1993 to current levels of $17 trillion!

The U.S debt is also slowing down as the country has reduced oils imports, which Gardiner said ‘will be a U.S game changer’. The country is currently sitting on 29 billion barrels in reservesÔÇöthe highest since 1985 and it is meeting 87 percent of the energy needs.

“Aside from that, the U.S economic recovery is gaining traction,” he said. The world largest economy is expected to expand 1.7 percent this year, which will be good news to the global economy.
His comments come at a time when the U.S lawmakers are counting losses following the economic shutdown that came with furloughs (non-essential staff forced to go on unpaid leave).

However, lawmakers managed to avert the crisis of debt default by extending the borrowing limit until February. This matters to Botswana as the U.S is major market for Botswana’s high-value, low-volume tourism and consumes 45 percent of the country’s diamonds.

Will the argument arises again in February? “It is difficult to say. The Republicans learnt a lesson, but the Tea Party is mad,” Gardiner said.

Gardiner added that finally, after six negative quarters ÔÇô the longest recession since inception of the Euro 14 years ago ÔÇô Europe is growing again, albeit by only 0.2 percent (Q2 2013).

“Mr. Mario Draghi’s pledge that the European Central Bank will ‘do whatever it takes’ has certainly brought calm to the region, with bond yields back to normal levels, stock markets at record highs and the health of the financial system improving. However, debt levels are at record highs as well, as are mortgage delinquencies and youth unemployment”.

“…..the world is improving and heading in the right direction. Debt levels in the developed world, however, are not. These remain perilously high and are increasing. Energy might come to America’s rescue in this regard, but Europe won’t be so lucky and will have to do it themselves,” he added.


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