Mar 13, 2022 - World

IMF managing director expects "deep recession" in Russia

International Monetary Fund Managing Director Kristalina Georgieva
IMF managing director Kristalina Georgieva speaks during a press conference on March 4, 2020, in Washington, D.C. Photo: Samuel Corum/Getty Images

The International Monetary Fund expects a "deep recession" in Russia following the immense sanction regime imposed in response to its invasion of Ukraine, IMF managing director Kristalina Georgieva told CBS News' "Face the Nation" on Sunday.

The big picture: “In terms of servicing debt obligations, we no longer think of Russian default as improbable," Georgieva added.

  • The ruble has depreciated significantly with the sanctions, meaning real incomes in Russia have shrunk and the purchasing power of the Russian population has significantly diminished, Georgieva said.

Why it matters: Georgieva said she is concerned about the consequences beyond Ukraine and Russia.

  • In particular, the IMF is concerned about the immediate neighbors of Russia and Ukraine, including the Central Asian republics, the Caucasus and Moldova, Georgieva said. These countries have more trade relations with Russia and Ukraine than the rest of the world, she added.
  • The shock from the sanctions is also particularly painful for countries that have yet to recover from the COVID-induced economic crisis, Georgieva said.
  • The IMF is also concerned about countries that are more dependent on energy imports from Russia, because the impact on consumption and inflation is going to be more prominent, she said. Countries in Europe are particularly dependent on Russia for energy imports, with the European Union depending on Russia for about 40% of its natural gas, 27% of its oil imports and 46% of its coal imports, according to CNN.

The bottom line: While growth projections for 2022 will be downgraded, Georgieva said there will still be a positive growth rate, adding that the sanctions are unlikely to trigger a global financial crisis "for now."

  • The total exposure of banks to Russia is about $120 billion, which Georgieva said is "not negligent, but not definitely not systemically relevant."

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