National Bank governor warns of potential impact of prolonged Middle East conflict
The governor of the National Bank has warned of the potential impact on Belgium of a protracted conflict in Iran. If the war in the Middle East drags on, “we are truly vulnerable and it would only be a matter of time before the markets react”, Pierre Wunsch told the House Finance Committee on Tuesday.
Wunsch appeared before the Chamber to present the National Bank’s annual report. He also outlined the consequences that the conflict in Iran could have on the local economy.
If the war continues, the global economy will slow down, he outlined, potentially resulting in “very low growth or even a technical recession in Belgium”. A technical recession occurs when there is a contraction of gross domestic product over two consecutive quarters.
"To put it plainly: the money has run out. The resources we had in 2022 to weather the crisis are no longer there"
“The deficit would rise by 1 to 2 per cent of GDP, and we would be truly vulnerable” he said. “It would then be only a matter of time before the markets reacted.”
According to Wunsch, it is particularly important that the government is able to pursue credible policies.
“If that is the case, we can certainly survive it,” he said. “But if the government fails to bring the deficit under control, to continue taking measures, then we are very vulnerable. To put it plainly: the money has run out. The resources we had in 2022 to weather the crisis are no longer there.”
National Bank governor Pierre Wunsch © BELGA PHOTO BENOIT DOPPAGNE
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