Spain and Portugal, the two powerhouses of Southern Europe, have benefited from energy independence, tourism dividends, and a lower reliance on manufacturing. Not only have they successfully avoided the wave of global industrial recession, but they have also become the new dual engines of the European economy. The “Iberian Twins” have completely turned around from the shadow of the former “PIIGS” countries and have become the “sweet spot” in the eyes of global investors!
Economy of the Year
Southern European countries have once again become highlights on the global economic stage! The British magazine The Economist selected Spain as the “Best Global Economy of 2024” based on a comprehensive performance across five major indicators: GDP growth rate, stock market performance, core inflation rate, unemployment rate, and government deficit. This year, Portugal takes over from last year’s winner Spain, being named by The Economist as the “Best Global Economy of 2025.” The outstanding economic performance of the “Iberian Twins” stands in sharp contrast to the sluggish traditional economic engines of Germany and France.
While the economies of Germany, France, and the Eurozone as a whole have stagnated or experienced low growth, the economies of Spain and Portugal have significantly outperformed the Eurozone. According to the revised GDP figures for the third quarter released by the European Union’s statistical office, the Eurozone’s GDP grew by 0.2% quarter-over-quarter, higher than the 0.1% growth in the first quarter; year-over-year growth was 1.4%, slightly below the 1.5% recorded in the second quarter. The European Commission estimates that the Eurozone’s economic growth rate for 2025 is likely to be revised upward from the original forecast of 0.9% to 1.3%, which is higher than last year’s 0.9%. In contrast, according to the OECD’s Economic Outlook report, Spain’s GDP is expected to grow significantly by 2.9% this year and 2.2% next year—growth rates that are double the Eurozone average and even surpass those of the United States. This is a remarkable achievement for a large, mature economy. Portugal’s GDP grew by 2.4% in the third quarter, with the full-year economic growth rate projected to reach 2% this year and climb to 2.3% next year. The unemployment rate in the third quarter dropped to 5.8%, down from 5.9% in the second quarter and 6.1% in the same period last year, marking the lowest point since the 2008 financial crisis. This has directly resulted in a perfect scenario of high growth, high employment, a booming stock market, and low inflation—the ideal “three highs and one low.”
Multiple Structural Advantages
The strong economic performance of Spain and Portugal mainly stems from multiple structural advantages. First, both countries boast abundant tourism resources and pleasant, sunny climates. Post-pandemic rebound travel continues into 2025, shifting towards “high-quality” tourism. Countries like Germany and France heavily rely on manufacturing and industrial exports, making them vulnerable to weak demand from China and global trade tensions. In contrast, Spain and Portugal have service-oriented economies, and global consumers are more willing to spend on “experiences” (such as travel and dining) rather than “goods” (like cars and machinery), which greatly benefits these tourism-driven nations.
Additionally, Spain and Portugal possess some of Europe’s richest renewable energy resources (solar and wind). Portugal has even set records for consecutive days of 100% renewable energy-powered electricity. This results in electricity prices far lower than those in countries like Germany, which depend on Russian natural gas or expensive energy imports. The low energy costs not only help reduce inflation but also attract tech giants like Amazon and Microsoft to build data centers locally.
Beneficiaries of NextGenEU
In contrast to the current exclusionary and restrictive immigration policies of Western European and American countries, Spain and Portugal have taken the opposite approach by implementing favorable tax policies that have successfully attracted a large influx of wealthy foreigners. They have also absorbed a significant number of immigrants from Latin America (mainly Spain) and Brazil/Africa (mainly Portugal). These immigrants not only fill gaps in agriculture, construction, and service industries, but many “digital nomads” have also flocked to Lisbon, Portugal, bringing strong purchasing power and technological vitality. The Sánchez government in Spain even plans to legalize 900,000 undocumented immigrants within the next three years.
Spain and Portugal are among the biggest beneficiaries of the European Union’s massive €750 billion “NextGenEU” recovery fund, which was originally designed to support EU members in post-pandemic economic recovery and to promote a greener, more digital, and more resilient future. The governments of Spain and Portugal have effectively invested these funds in digital transformation and green energy infrastructure. These public investments have directly boosted the economic performance of both countries. Therefore, despite the EU signing a tariff agreement with the Trump administration imposing a 15% tariff on most EU goods, the International Monetary Fund (IMF) states that Spain and Portugal have been noticeably less affected than other major EU economies.
Equity Iberian Funds Performance Analysis
This year has been one of “strong South, weak North” in Europe. According to statistics up to December 12 of this year, Portugal’s PSI index has surged by as much as 24.8% year-to-date, officially breaking through the 8,000-point mark and reaching its highest level since 2010. This performance is mainly driven by record profits in the banking sector and strong showings from energy utilities. Similarly, Spain’s IBEX 35 index has risen even more sharply, up 44.3% year-to-date, ranking among the top performers among major global and Eurozone indices. Key heavyweight stocks such as Santander Bank and energy giant Iberdrola have delivered substantial profits, while domestic consumer stocks have supported the overall performance of the Spanish market. According to Lipper statistics as of December 12, there is currently one Iberian Peninsula equity fund registered for sale domestically, denominated in New Taiwan Dollars. This Iberian Peninsula equity fund has achieved an average year-to-date return of 49.3%, a three-month average return of 7.8%, a six-month average return of 20.7%, and a one-year average return of 46.8%.
Table 1: Equity Iberian RFS in Taiwan
Source：LSEG Lipper, as of 2025/12/12, in TWD
Figure 1: OECD Countries GDP of 25Q3
