Portugal named ‘Best Economy of the Year’ by The Economist
Over the past few years, Portugal’s economic ranking has been quietly rising. Now, in 2025, it has been crowned the world’s best-performing economy—when people think of Portugal, they no longer picture only pastéis de nata and sunshine, but also stability and opportunity.
Why was Portugal named the ‘Best Economy of the Year’ in 2025?
In 2025, Portugal was named ‘Best Economy of the Year’ by a leading British financial publication. This means that among the 36 wealthiest countries globally, Portugal delivered the strongest macroeconomic performance in the annual ranking.
The Economist’s ranking is based on five key indicators: inflation rate, deviation of inflation from its target, GDP growth, employment rate, and stock market performance. Portugal topped the list thanks to robust economic growth, relatively low and stable inflation, and a bullish domestic stock market—an impressive feat. In the final rankings, Ireland and Israel followed Portugal, while Spain—last year’s top performer—slipped to a tie for fourth place. Domestically, the Portuguese government forecasts GDP growth of around 2% this year and 2.3% next year. Taken together, this performance and outlook have led many commentators to view Portugal as a quietly successful model—an economy that has finally shed its crisis-prone image and now projects greater stability and sound management.
Key Economic Indicators for Portugal in 2025
• Portugal’s growth rate in 2025 will outpace many larger economies in the eurozone.
• Although inflation remained a challenge following the energy shocks of the early 2020s, it has declined faster than in several neighboring countries.
• Unemployment has trended downward compared to the eurozone crisis era, driven by job gains in services, tourism, and tech-enabled shared services.
• Public deficits and debt are moving toward more sustainable levels—a development that typically wins favor with investors and rating agencies.
What does Portugal’s economic performance mean for residents and international observers?
For those living in Portugal or considering moving there, the country’s strengthened economy and enhanced credibility bring more benefits than drawbacks. Advantages include more job opportunities, greater resilience to minor eurozone fluctuations, and growing interest from international businesses. This confidence has also attracted real estate investors—particularly to Lisbon, which has been named Europe’s best city for real estate investment in 2026. Porto’s property market is likewise drawing increasing international attention. Foreign demand has surged, with American buyers flooding into Portugal, further fueling a property boom. On the flip side, this prosperity has intensified housing and rental pressures in popular cities and coastal areas, as locals, returning expatriates, and investors compete for limited inventory. Real estate data shows clear price appreciation in recent years—especially in central Lisbon, Porto, and the Algarve—where British and American buyers are the main drivers of demand. Soaring housing costs have pushed Portuguese property prices among the highest in the EU, while wages remain relatively modest. Thus, although many citizens take pride in Portugal’s 2025 ‘Best Economy’ title, they are also feeling the downside of this success—particularly in monthly rent and mortgage payments.