The Economist Crowns Portugal Top Performer Among Rich Economies for 2025

If you have sensed the country buzzing with extra energy lately, you are not alone. A data-driven verdict from London has placed Portugal at the very top of a league it rarely leads: The Economist’s annual ranking of the world’s 36 richest economies now puts us in first place, crowning Portugal “Economy of the Year 2025.”

Quick takeaways

• Fastest GDP expansion in Western Europe so far this year

• Inflation holding below 3% despite global price pressure

• A 20 % rally on the PSI-20 stock index beats most European bourses

• Job creation outpaces the Eurozone average, keeping unemployment near record lows

• Lisbon credits the feat to structural reforms and EU recovery funds, while critics warn daily life is not yet cheaper

Why the accolade matters at home

Beyond the bragging rights, the distinction translates into stronger investor confidence, potentially lower sovereign borrowing costs, and greater bargaining power in Brussels. Prime Minister Luís Montenegro framed the ranking as proof that “the effort of every household and small firm” is paying off. Business chambers are already noting a rise in foreign enquiries, ranging from advanced manufacturing to green hydrogen. For everyday families, the immediate benefit is subtler: a mix of rising wages, stable prices and a resilient jobs market that together nudge purchasing power upward for the first time in a decade.

The five numbers that moved the needle

The Economist’s model adds equal weight to five indicators. Portugal topped the table because it scored in the green on each metric:

Inflation: 2.7 % annual average, among the lowest in the OECD.

Inflation deviation: price growth concentrated in a handful of categories rather than economy-wide.

GDP growth: 2.0 %, double the Eurozone pace.

Employment: record-high labour-force participation and falling long-term joblessness.

Stock-market performance: a 20 % surge in the benchmark, lifted by banks, energy and tourism groups.

Cheers, sceptics and the politics in between

Government benches erupted in applause, with the Economics Minister hailing a “turning point for national credibility.” Yet opposition voices such as left-wing presidential hopeful Catarina Martins criticised the celebration of figures that “do not pay the rent.” Independent economists caution that geographical inequality, low productivity and high housing costs could erode the feel-good story if unaddressed. Unions, gearing up for a December general strike, argue that nominal wage gains still trail Lisbon’s soaring rents and utility bills.

What is really driving the surge?

Three engines stand out. First, tourism roared back to pre-pandemic volumes and then some, filling hotels from Porto to the Algarve even during shoulder seasons. Second, an influx of affluent foreign residents — from digital nomads to pensioners — pumped money into construction, retail and services. Finally, the front-loaded spending of the EU Recovery and Resilience Plan lifted public investment in rail, energy and digital infrastructure. Together they created a virtuous circle: strong domestic demand, corporate profits, and a buoyant tax take that trimmed the public-debt ratio below 100 % for the first time since 2009.

How the neighbours fared

Portugal edged past Ireland in second place, whose tech-heavy GDP remains volatile, while Israel secured third on the back of robust R&D and high-tech exports. Former champion Spain slipped to fourth as energy subsidies expired. At the other extreme, Finland, Estonia and Slovakia battled recession-like conditions. Analysts note that Portugal’s climb is remarkable because it started from a lower income base and therefore needed a bigger leap to overtake wealthier peers.

What could spoil the party?

Forecasts by the IMF, European Commission and OECD all remain upbeat, pencilling in growth near 2 % and inflation around 2 % for 2026. Still, several clouds linger: a possible tourism slowdown if global travellers tighten belts, delays in EU fund disbursement, and an external shock to energy prices. The real test will be whether momentum converts into productivity gains, export diversification, and housing affordability. For now, the pastel de nata tastes a little sweeter, and Portugal has a shiny new badge to show the world — but the work of turning a headline into long-term prosperity is only beginning.