Boom with a view: our economy of the year

What It Covers

The Economist ranks Portugal as 2025's top-performing economy based on five indicators: inflation, inflation breadth, GDP growth, employment, and stock market performance. Southern Europe continues its four-year winning streak after decades of poor performance.

Key Questions Answered

• •Economy Ranking Methodology: Countries are scored across five metrics—inflation proximity to 2%, inflation breadth (share of goods rising over 2% annually), GDP growth, employment growth, and stock market returns—then combined into a composite ranking of rich-world economies.
• •Energy Price Impact: The 2022 Russian gas shock remains the primary factor dragging down economies like Estonia, Finland, and Slovakia. Countries highly exposed to Russian gas prices continue underperforming three years later, while less-exposed Southern European nations thrive with tourism and immigration-driven growth.
• •Stock Market Patterns: Israel's stock market led global returns in 2025, outperforming the US significantly. Historical data shows countries named Economy of the Year see average 20% stock market gains the following year, suggesting Portugal may continue outperforming in 2026.
• •Deflation Risk Zone: Sweden's 0% inflation rate poses greater economic risk than moderate inflation. When inflation approaches zero, consumers delay purchases expecting lower prices, real debt burdens increase, and economies risk spiraling into deflation, which creates more problems than controlled 2% inflation.