War and sanctions will also have significant spillover effects on neighboring countries.
International Monetary Fund Managing Director Kristalina Georgieva said Russia may default on its debt after imposing unprecedented sanctions over its invasion of Ukraine, but that it will not lead to a global financial crisis.
Georgieva told CBS that the sanctions imposed by the United States and other democracies have already had a "severe" impact on the Russian economy and will lead to a deep recession there this year.
She said the war and sanctions would also have significant spillover effects on neighboring countries that depend on Russian energy supplies, and had already resulted in a wave of refugees compared to those experienced in World War II.
Russia describes its actions in Ukraine as a "special operation".
Georgieva said the sanctions also limit Russia's ability to access its resources and service its debt, meaning that default is no longer seen as "unlikely".
When asked if such a default could lead to a worldwide financial crisis, she said, "For now, no".
She added that the total exposure of banks to Russia amounted to about 120 billion dollars, noting that although this is not an easy amount, it is not closely linked to the global financial system.
Georgieva said last week that the International Monetary Fund would cut its previous forecast for global economic growth to 4.4% in 2022 as a result of the war, but added that the overall trajectory remained positive.
She told CBS yesterday that growth remained strong in countries such as the United States, which were quick to recover from the Covid-19 pandemic.
She said the impact would be more severe in terms of higher commodity prices and inflation, which could lead to hunger and food insecurity in some parts of the African continent.
The Source
- reuters.com