Despite the most aggressive policy tightening cycle in decades, research and consulting firm Wood Mackenzie (WoodMac) metals and mining markets head Derryn Maade has said the global economy is expected to manage a “soft landing pace of growth”, easing back to pre-Covid-19 trends within the next three years.

Speaking at the Junior Indaba in Johannesburg on June 2, he warned that several risks remained in the path of achieving this and that the risks were largely skewed towards the downside.

One of the key risks was inflation.

“The market effects of the Russia-Ukraine war are significant, with impacts throughout global economies, with high food and energy prices stoking inflation.

“This is a major contributor to the softening economic environment, with consumer purchasing power being reduced as inflation rises. Inflation has hit a 40-year high in the US and other developed countries as a result,” Maade pointed out.

Another key risk was in policy decision-making.

He said that, with inflation at the top of the agenda for central bank governors around the world, many nations had reacted to curb its impact by raising rates, unwinding liquidity and consolidating public spending.

While this had led to the advantage of re-establishing policy headroom, Maade said that the underlying growth appeared to be softening.

He warned that, if the policy response was wrong, it could add up to the perfect storm: Covid-19, Russia-Ukraine, supply chain shocks, high energy prices, overly tightening monetary and fiscal policy into a weakening consumption environment, and a deteriorating investment outlook.

However, Maade saw the energy transition as a major opportunity for the mining sector.

“The energy transition will redefine the entire metals and mining landscape,” he said.

He noted that the majority of the new supply of minerals and metals needed for the energy transition to be possible had to be found outside of the majority of the mining industry’s current investment commitments, meaning that the risk to delivery was greatly enhanced.