BNP Paribas Fortis: China’s real estate crisis will rein in eurozone inflation

Eurozone inflation is expected to fall below the European Central Bank’s 2 per cent target in 2026, partly due to the ongoing property crisis in China, according to new macroeconomic forecasts released by BNP Paribas Fortis on Wednesday.

China is still grappling with falling prices as its property bubble continues to unravel, four years after the crisis began. Due to more difficult access to the US market, amid a trade war with Donald Trump's administration, China is increasingly sending its excess production to Europe.

According to BNP Paribas Fortis, this downward pressure on import prices will help push eurozone inflation from 2.1 per cent this year to 1.8 per cent in 2026. An additional factor is the strong euro compared to the US dollar. The bank expects the euro to grow even stronger in 2026.

Brake on growth

The Chinese real estate crisis is also putting a brake on global economic growth, BNP Paribas Fortis says. The bank does not, however, expect a repeat of Japan’s prolonged property slump after 1991, which kept house prices depressed for nearly two decades.

Other macroeconomic uncertainties include the US import tariffs, which could be ruled unlawful by the country's supreme court. For Belgium specifically, the bank cites the impact of German infrastructure investments and a lack of clarity around the government's planned austerity measures for 2026.

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In its forecasts, BNP Paribas Fortis expects the Belgian economy to grow by 1 per cent this year and 1.1 per cent in 2026. For the eurozone as a whole, the bank predicts "an all in all more than decent" 1.4 per cent growth in both 2025 and 2026.

Germany, the eurozone’s largest economy, is also expected to show signs of improvement. After years of stagnation, its economy is forecast to accelerate in 2026 thanks to a 10-year 500 billion euro investment plan, coupled with a near-equivalent rise in defence spending.

According to BNP Paribas Fortis, the scale of the programme rivals the investments of the Marshall Plan after the Second World War and surpasses the sums West Germany poured into the former East Germany after reunification.

^{Illustration © PHOTO ANTONY DICKSON / AFP}

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