Financial sanctions will drive Russia into 'deep recession,' shift global economic order: IMF official

A senior executive at the International Monetary Fund says "unprecedented" sanctions against Russia should send that country into a deep recession, while the conflict will have spillover effects in the wider global economy.

Gita Gopinath warns of spillover effects of conflict, sanctions, into global economy

People stand in line to withdraw U.S. dollars and euros from an ATM in St. Petersburg, Russia on Feb. 25, one day after Russia invaded Ukraine. (Dmitri Lovetsky/AP)

A senior official with the International Monetary Fund says "unprecedented" sanctions against Russia will drive that country into a deep recession, while the fallout of the conflict with Ukraine will have profound negative effects on the wider global economy.

Gita Gopinath, a senior deputy managing director with the international financial institution, said in an interview that aired Sunday on Rosemary Barton Live the world will continue to face increased commodity prices, disruption in Eastern European countries and depressed economic confidence in consumers and investors.

"The scale at which we're seeing this happen is really, really large. I think it has implications for the global economic order as we know it," Gopinath told CBC chief political correspondent Rosemary Barton.

"We're also seeing that the next set of sanctions will be on either removing Russia from the World Trade Organization. So these are big shifts that are happening ... And the longer it lasts, the more likely it is that we will see big changes in the global order," she said.

The IMF this week approved US$1.4 billion in emergency financing to Ukraine, which Gopinath said would help the embattled country deal with acute shortages in basic goods and infrastructure resulting from the ongoing war started by Russia.

But Gopinath told Barton there is little the IMF can do to punish Russia directly given that it has no active programs in the country.

She said she would not speculate on the possibility of booting Russia from the IMF, but said "We've seen the unthinkable happen in terms of a war in Europe, so at this point, I'm not going to speculate, but things are moving so quickly and rapidly that many things are possible."

WATCH | IMF official discusses effect of Ukraine conflict on global economy:

International Monetary Fund official discusses the economic impact of Russia's invasion of Ukraine

4 months ago
Duration 8:19
Gita Gopinath, the International Monetary Fund's first deputy managing director, speaks to CBC chief political correspondent Rosemary Barton about the economic consequences of Russia's invasion of Ukraine. The IMF approved $1.4 billion U.S. in emergency funding for Ukraine.

Canada has moved with other North American and European countries to place significant sanctions on Russian entities, including cutting off some banks from the SWIFT financial communications system. Prime Minister Justin Trudeau said the sanctions are aimed at Putin and his "fellow architects of this barbaric war" while Foreign Affairs Minister Mélanie Joly has said they are aimed at "suffocating" the Putin regime.

Among those recently sanctioned by Canada was Russian billionaire Roman Abramovich, who is the largest shareholder in the steel company Evraz, which operates in western Canada. Finance Minister Chrystia Freeland warned early in the conflict that international sanctions could have effects in Canada, but Trudeau downplayed that fear this week.

"The sanctions on Russian officials and oligarchs like Abramovich are directed at them so that they cannot profit or benefit from economic activities in Canada — or the hard work of Canadians working in companies that they have investments in," Trudeau said while in Poland on a tour to visit European allies.

Ukraine has repeatedly asked for additional aid from western countries, which have responded with economic measures as well as material military aid, but have not become directly involved in the conflict.

Ukrainian president Volodymyr Zelensky is set to address the House of Commons this Tuesday.

You can watch full episodes of Rosemary Barton Live on CBC Gem, the CBC's streaming service.

With files from Arielle Piat-Sauvé and Rosemary Barton

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