The economic and sanctions fallout of Russia's war in Ukraine
Russia's war in Ukraine will be felt throughout the global economy, particularly in the poorest countries, the head of the International Monetary Fund said this week.
"The impact is going to be felt fast and far," Kristalina Georgieva said in an interview with 60 Minutes.
Although the IMF will downgrade its previous economic forecast of 4.4 percent global growth, Georgieva stopped short of suggesting the war will cause a global recession. The Bulgarian-born IMF head also said she still expects strong growth in the United States, which was already better positioned to recover from the pandemic.
Instead, the biggest impact the war will have will be in driving up inflation and commodity prices. The most severe effect will likely be felt in poorer countries, which were already economically hard-hit by Covid, and those that rely on wheat and corn imports from Russia and Ukraine. Together, the two countries account for more than one quarter of global wheat exports and roughly 15 percent of corn trade, according to the American Farm Bureau Federation.
"Very simple message: War in Ukraine means hunger in Africa," Georgieva explained.
Higher food and energy prices will push global inflation higher, forcing a delicate balance for central banks around the world already trying to rebound from the pandemic.
"How they calibrate between fighting inflation and not throwing cold water on the recovery is going to be a tremendously difficult task," Georgieva said.
The lingering effects of the pandemic may also impact China's response to the war, the IMF head offered.
Beijing's zero-tolerance approach to the coronavirus has contributed to the country's slowed economic growth. Stepping in as a lifeline for Russia against sanctions would further jeopardize China's growth, something president Xi Jinping likely does not want to risk as he looks ahead to his country's party congress, which is expected to re-elect him later this year.
"It is very, very likely that they would be concentrated on protecting their ability to inject resources into their own economy, versus protecting the $150 billion they trade with Russia," Georgieva said.
The economist who designed the U.S. sanctions against Russia agrees. Deputy National Security Advisor for International Economics Daleep Singh told 60 Minutes that China is a rising power seeking to engage with the world. Helping Russia, whose economy is a fraction of that of the U.S. or the European Union, does not help China grow.
"China may want Russia as a junior partner to supply cheap oil and gas," Singh said, "but let's not pretend it's anything more."
The video above was produced by Brit McCandless Farmer and Will Croxton. It was edited by Will Croxton.