Brussels attacks have only "modest" impact on Belgian economy: ECB's Smets

[BRUSSELS] Belgium's economy is unlikely to have suffered a major setback from the March 22 bombings in Brussels but some sectors may feel the strain, Belgian central bank governor Jan Smets said.

On March 22 three suicide bombers killed 32 people in Brussels in attacks that shut down the airport and disrupted business around the Belgian capital.

"The macro impact is modest and the experience from such tragic events in other countries shows that the economic effect is mostly short-lived," Mr Smets told Reuters in an interview.

The European Commission lowered its economic outlook for Belgium after the attacks, saying it now expected growth of 1.2 per cent in 2016, down from its previous forecast of 1.3 per cent, due in part to the militant Islamist attacks.

According to the Belgian central bank's flash estimate, economic growth in the first quarter of 2016 slowed to 0.2 per cent from 0.5 per cent, below the eurozone average of 0.6 per cent.

Mr Smets said growth in the first quarter could have been between 0.03 and 0.1 percentage points higher without the attacks, citing the importance of Brussels' airport to the Belgian economy. "You also see some impact in some segments such as hotels, mainly in the Brussels region," he added.

Mr Smets stressed the importance of the Belgian government balancing its budget in the coming years in order to reduce its public debt level, which stood at 106.5 per cent of annual economic output in 2014.

The government aims to have a balanced budget by 2018, though the European Commission still estimates a 2.3 per cent structural deficit for 2016, requiring additional cutbacks.

"Sufficient structural measures should be taken in 2016 and 2017 to make sure their structural return is guaranteeing a structural balance, within the horizon of the stability programme," Mr Smets said.

REUTERS