Given President Trump’s trade wars and the rising geopolitical tensions recently, who would have thought that 2025 would have been such a positive year for markets and economies? True, not every economy boomed in the year just ended. The UK economy pretty much flatlined – not the result that the government was hoping for. Portugal, on the other hand, shone as a leading light in European and, indeed, world economies. Why might this be and how do you judge success in this most complex field to assess?
Let’s start with stock markets – the field in which I spent my 60 years of endeavour in London’s Square Mile. Most investors would have been looking at the performance of the US market, which is, after all, the world’s largest. The S&P 500 Index, considered to be the best benchmark of the US economy, rose some 16% during the year. The more tech-oriented NASDAQ was up by 19%. Chip maker Nvidia, now the world’s largest company by market capitalisation, added 39% to its value. Not numbers to be sniffed at.
But contrast that with the UK, where the FTSE All Share Index rose by 24% and the wider European STOXX Index by 32% and you start to view the American achievement as positively pedestrian. Closer to home, the market here in Portugal matched the EuroSTOXX performance, which provides a measure for European stock markets. It rose by double the amount of the US. Not that markets are necessarily driven by economic performance. Still, it does help.
The Economist magazine recently published its performance analysis for 36 of the world’s leading economies. In top spot was Portugal, driven by a combination of inflation, Gross Domestic Product (GDP), jobs and stock market performance. Ireland, Israel and Spain follow the leader, but the success of the tourism industry and a flow of incomers, many of whom came from America, help to keep Portugal’s nose in front of the opposition.
Of course, we know this is not necessarily a good thing for all our residents. House prices have been rising sharply. Many local workers feel unable to climb aboard the property-owning ladder, particularly here in the Algarve. This can impinge upon crucial workers, like doctors and nurses. To be fair, this is not a problem unique to Portugal. In Britain, this concern has also been raised, with the situation exacerbated by residential housebuilding failing to keep up with demand.
So, where are the buyers in the Algarve coming from? I’ve already mentioned the United States as an increasingly important catalyst for demand. Talking to an estate agent (real estate broker if you are an American reading this) in Lagos, he pointed to the fact that before COVID, only around 6% of sales were to those relocating from the US. Now, he said, more than 50% of the properties he has sold have been bought by Americans.
The UK continues to provide a steady stream of buyers anxious to benefit from the better weather we have to offer and, perhaps, to escape from a government seemingly keen to separate more of its citizens from their hard-earned cash as they seek to repair the country’s finances. And the UK also contributes hugely to the tourism boom Portugal is experiencing, and which is contributing to a higher rise in GDP than that experienced by other European countries.
With inflation relatively muted, Portugal has ticked many of the boxes that The Economist required to elevate the country into the prime position in its table of economic performance. Last year, it was Spain that occupied the top spot. This year, they have been relegated to equal fourth with Colombia.
We should all be grateful that we live in a stable and successful country. Long may it last. And long may the clement weather and friendliness of the local population keep Portugal at the top of places most desirable in which to live.
Brian Tora had a successful career in the city before becoming a writer and broadcaster.
