IMF Mentions Possibility of Default... Putin Says "Sovereignty Over Economic Gains"

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF)
[Image source=Reuters Yonhap News]

[Asia Economy reporters Hyunwoo Lee, Hyunjin Jung, Hyunui Cho] Amid growing assessments that Russia’s default risk has increased due to Western sanctions triggered by Russia’s airstrikes on Ukraine, Russian President Vladimir Putin has reaffirmed his determination to continue the war, stating that "sovereignty cannot be compromised for economic gain." As the impact of sanctions spreads to the global economy, attention is focused on how Russia’s resistance will affect the war situation and markets.

According to the New York Times (NYT) and others on the 10th (local time), Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), told reporters that unprecedentedly strong international sanctions have caused Russia’s economic downturn and that it now faces a serious recession risk. She also said that the possibility of Russia declaring default is no longer an impossible scenario.

The IMF is not the first financial institution to predict Russia’s default risk. Earlier, JP Morgan stated in a recent report that Russia could declare default by failing to repay approximately $700 million in dollar bonds maturing on the 16th due to various sanctions. The world’s three major credit rating agencies?Fitch, Standard & Poor’s (S&P), and Moody’s?have all downgraded Russia’s credit rating to just before default. The Institute of International Finance (IIF) forecasted that Russia’s GDP growth rate this year will fall to -15%, 18 percentage points lower than the previous forecast of 3%.

The problem is that the damage from Western sanctions against Russia is being fully transmitted to the global economy. Georgieva hinted that the IMF will soon revise downward its global economic growth forecast. The IMF’s global growth forecast announced in January was 4.4%. Georgieva diagnosed that the Ukraine crisis is the greatest threat to the global economy as it has already caused sharp rises in international food and energy prices amid high inflation, affecting global trade.

Russian President Vladimir Putin
[Photo by EPA Yonhap News]

Despite this situation, President Putin threatened to continue the invasion of Ukraine. According to TASS news agency and others, he presided over a government meeting on the Western sanctions against Russia and asserted, "Russia has no alternative to the special military operation in Ukraine."

He emphasized, "We cannot allow our sovereignty to be compromised for short-term economic gain," and added, "Western sanctions will lead to increased self-sufficiency and sovereignty." He boasted that Russia is willing to bear economic losses to gain security and strategic benefits through the occupation of Ukraine, which is interpreted as a move to pressure the U.S. and the West.

He also hinted at the possibility of implementing nationalization measures on foreign companies’ assets, which are being discussed in the Russian government and parliament as a countermeasure to Western sanctions. President Putin stressed, "I support the idea of external management for foreign companies that have announced their withdrawal from Russia." Previously, the ruling United Russia Party stated in a press release that they are reviewing with the government’s legislative committee a measure to nationalize assets of companies owned 25% or more by foreigners from unfriendly countries that have ceased operations in Russia.

Despite Russia’s threats, Wall Street financial firms such as JP Morgan and Goldman Sachs announced on the same day that they would suspend operations in Russia. Foreign media reported that their exposure to Russian bonds is not significant. Seven Russian banks and others are scheduled to be cut off from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment network connecting global financial institutions starting from the 12th.

This content was produced with the assistance of AI translation services.