Global financial market movements over the last month have been heavily influenced by central bank announcements in Europe, Japan and the US. While global monetary policy remains accommodative, at the margin the lack of additional monetary stimulus by the European Central Bank and an implicit reduction in Japanese policy easing resulted in the financial backdrop for emerging markets becoming slightly less favourable over the past few weeks.Market nervousness has also been compounded by a growing sense that monetary policy is approaching its limits.However, emerging market economies including South Africa have weathered these developments relatively well. This is thanks to an increasing realisation that their macroeconomic policy settings have made the group less vulnerable and have contributed towards an improved economic outlook.After tightening monetary and fiscal policy over the past few years, inflation in many emerging economies has peaked and fiscal and current account deficits have narrowed. Growth in these economies is generally expected to increase over the medium term.story_article_left1In contrast, the outlook for developed markets remains lacklustre due in part to the diminishing returns of easy monetary policy as well as to still high debt levels and structural factors such as adverse demographics and elevated income inequality. This environment has increased the risk of a shift to unconventional and populist policy as electorates express their dissatisfaction with the status quo.Presidential elections next month in the US and throughout 2017 in Europe could see Brexit being followed by more unfavourable political outcomes. For this very reason, the scope for fiscal policy is being reassessed.While government debt levels remain high, current rates provide an opportunity to finance infrastructure investment, which would boost growth.For South Africa there is nascent evidence that the business cycle has passed its worst phase. The relatively benign global macroeconomic and market backdrop, in addition to continued signs of domestic economic rebalancing, a perceived decline in local political risk and a related increase in the likelihood of structural reform, even if limited, has seen South Africa's currency and debt markets appreciating in value.Increased exports and slower import growth rates saw the current account deficit fall to 3.1% in the second quarter of 2016, its lowestin a year, which has significantly reduced the vulnerability of the rand to declines in global risk appetite. story_article_right2A narrower current account deficit is expected to remove some of the drag that has lowered growth rates over the past few years.The lack of new adverse developments in the Hawks case against Finance Minister Pravin Gordhan and the compromise solution that seems to have been reached regarding the SAA board have seen concerns around the future of the National Treasury's independence quietening down for now. In addition, the launch of a R1.5-billion fund to invest in small and medium enterprises and indications that a move towards secret strike ballots will be announced soon are raising the odds of South Africa avoiding a sovereign rating downgrade in December.The improved outlook for the rand, the prospects of improved rainfall and lower administered price increases have lowered the upside risks to the inflation outlook. Finally, the expected fall in inflation, by increasing real income growth, will contribute towards a pick-up in growth in 2017 and 2018.Nxedlana is FNB chief economist..