CAPE TOWN (miningweekly.com) – Falling global trade, decreasing cross-border capital flows and tightening immigration are the backdrop to the upcoming recessionary environment that will eventuate in the US in 2018 along with rising inflation, global economist Dambisa Moyo said on Monday.

Speaking at the Investing in African Mining Indaba, Moyo said even before President Donald Trump took office the deglobalisation trend was under way.

She noted that trade growth had been on the decline for some time, worsened by the introduction of as many as 644 new constraining measures introduced around the world.

There had been a $2.6-trillion decline in cross-border capital flows over the last two years accompanied by a 9% decline in bank lending.

As countries reset public policy towards re-hiking tariffs, questions were being posed on how governments would be able to fund infrastructure, especially in emerging markets around the world hit by the most significant withdrawal of capital since 1988.

There was a real question, Moyo said, of how African mining would be funded in these circumstances in a world where the 65-million refugees around the world was the highest since World War Two and still disorderly in the absence of a global organisation to deal with it.

“I strongly believe the immigration issue will intensify, which will present aspects on how businesses are stacked,” Moyo told the Mining Indaba, being held in Cape Town, where Creamer Media’s Mining Weekly Online is in attendance.

By the end of 2018, there is a 35% chance of a recession in the US, which will have knock-on effects.

The benefit of the US government’s plan for a $1-trillion fiscal stimulus through infrastructure development may be overstated given that the benefit of Japan’s $3.6-trillion expenditure was negligible, “which is why I’m quite bearish on the US”, said Moyo.

The projected US interest rate hikes of 75 basis points would have significant implications for the countries in Africa that have onerous sovereign debt.

“It means we will start to see interest rates rise related to a strong dollar, which in theory should help African exporters, but the problem of border taxes and the threats of protection means high interest rates could be at a time when export revenue is down,” Moyo summed up.

While a strong dollar would normally be positive for emerging markets, border taxes and protectionism as well as interest rates could see these countries ending up in a very precarious situation.

The US’s more protectionist stance would result in far more inflation in the US and more deflation in Africa and countries around the US.

An extension of the US’s aggressive stance on Mexico to China would mean a "China slowdown" in Africa, where there will be consolidation opportunities.

Given inflation prospects and concerns around a weakening global economy, Moyo’s advice is that people should be buying gold.