Principality of Andorra: Staff Concluding Statement of the 2026 Article IV Mission
IMF News, March 9, 2026
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- Published: March 9, 2026
Mission summary and key findings
- Andorran economy continued to exhibit robust growth driven by external demand and a prospering financial sector.
- Cautious fiscal management translated into a strong fiscal performance and reinforced fiscal buffers.
- Banks continued performing well, but their large size warrants ongoing close supervision.
- Structural challenges that will put downward pressure on medium‑term growth: low productivity, lack of affordable housing, and aging that will strain public finances.
- The European Union Association Agreement (EUAA) would deepen integration into the EU’s single market and diversify sources of growth but involves transition costs and an uncertain ratification timeframe.
- Reforms to public pension and healthcare systems are needed to make them sustainable.
Economic outlook and projections
- 2025 outturns:
- Real GDP growth: 2.9 percent (estimated for 2025).
- Inflation (average): 2.4 percent (2025), down from 3.1 percent in 2024.
- Current account surplus: estimated at 16 percent of GDP in 2025.
- Central government surplus: estimated 2.5 percent of GDP in 2025.
- Central government debt reduced to below 30 percent of GDP in 2025.
- Forecasts and medium-term path:
- Growth projected: 2.3 percent in 2026, converging to 1.5 percent by 2030.
- Inflation: flash estimate 3.1 percent year-on-year in February (recent pickup), projected to decline to 2.3 percent in 2026 and converge to 2 percent by 2027.
- Short-term risks:
- Broadly balanced with downside risks from external shocks (weaker growth among trading partners, higher import-driven inflation), vulnerability from cross‑border infrastructure disruptions, and geopolitical/trade tensions.
- Upside: external demand could be more resilient and support stronger growth.
- Medium-term downside risks if no policy action:
- Population aging increasing pension and healthcare expenditures.
- Labor shortages exacerbated by unaffordable housing.
- Climate change impacts on tourism and infrastructure.
- Approval of the EUAA is an upside risk via diversification and resilience.
Fiscal policy priorities and public finances
- Near-term focus:
- Social priorities and closing the public-sector wage gap.
- 2026 budget prioritizes affordable housing, social spending, and public investment; approved budget targets a deficit of 1 percent of GDP.
- IMF staff forecasts a small surplus of about 0.3 percent of GDP for 2026 (driven by investment and impacted by recent developments, including Pas de la Casa temporary road closure).
- Public sector wages:
- Two-year plan to increase public sector wages over 2026–27 based on a civil service pay study to close position‑by‑position remuneration gaps.
- Expected limited inflationary impact due to openness and high import intensity of consumption; authorities advised to remain vigilant and stand ready to tighten fiscal stance if inflation remains elevated.
- Medium-term fiscal guidance:
- Balance buffer accumulation with growth-enhancing use of fiscal space while preserving debt sustainability.
- Anchor revenue forecasts to current-year outturns (as done in the 2026 budget).
- Execute budgeted investment using available fiscal space to unlock growth opportunities (affordable housing, workforce upskilling, transport connectivity, administration digitalization).
- Strengthen GDP forecasting to improve revenue estimation and budget planning.
- Healthcare cost containment recommendations:
- i) Strengthen management of medium-term government health spending, setting clear expectations for sustainable growth.
- ii) Build on the draft health sustainability action plan: identify savings and adopt measures in the budget process, including increased treatment at primary and community care level, tighter policies and processes governing sickness benefits, and reforming payment structure for health providers to rely less on fee-for-service.
- iii) Continue proactive development of efficient services (e.g., aging unit at Servei Andorrà d'Atenció Sanitària (SAAS)) that support quality of life.
- Asset management:
- Establish an overarching asset and liability management framework.
- Align pension reserve fund investment strategy with long‑term liabilities as pension reform advances.
Financial sector stability and supervision
- Banking sector performance:
- Consistently sound results in recent years.
- Regulatory and supervisory framework increasingly aligned with EU standards under the Andorran Financial Authority (AFA).
- Banks expanding asset management activities abroad, primarily within the EU, strengthening income diversification.
- Systemic risk considerations:
- Banking assets remain very large relative to the domestic economy—constitutes a systemic risk.
- Important for the AFA to continue close supervision and for banks to maintain buffers commensurate with their risk profiles and cross-border activities.
- FSAP:
- Preparations underway for the Financial Sector Assessment Program (FSAP) in 2026—Andorra’s first since joining the IMF.
- FSAP will assess progress and identify remaining vulnerabilities, including systemic risk.
Structural reforms to lift potential growth and diversify the economy
- Housing affordability:
- Authorities increasing investment in affordable housing, but uptake outside central locations is limited.
- Recommendations: remove distortions to balance supply and demand, support vulnerable populations, and improve coordination between parishes for consistent permits and fees.
- Regional integration and productivity:
- Align reforms with best practices, deepen regional value chains, advance digitalization, facilitate labor mobility, and leverage shared infrastructure—requiring additional public investments.
- EUAA implementation:
- Harmonization with EU regulatory standards could foster domestic and foreign investment and support net exports.
- EUAA includes transitional periods for telecommunications, tobacco, and finance sector.
- Short-term transition costs expected (adoption of regulations/procedures, additional public-service workers); timing uncertain pending ratification.
- ICT, digital intensity, and skills:
- Firms report recruiting and retaining ICT talent is difficult; investment in R&D is lower than peers.
- Continue ICT‑oriented education (e.g., STEM), invest in professional and vocational training with apprenticeships to address skill shortages and raise digital intensity, especially among SMEs.
- Diversification strategy design:
- Public policy should catalyze an enabling environment (reduce administrative rigidities, promote access to financing, target incentives, improve housing access, and support international partnerships); private sector to drive technological adoption and commercialization.
- National Plan for Innovation and Diversification focuses on four pillars: health, sports, construction, and technology; includes innovation hub, educational programs, bootcamps, and startup accelerators.
Data, statistics, and monitoring
- Progress made:
- International Investment Position and Balance of Payments annual data published 5 months sooner than last year.
- Quarterly series published for the first time.
- Statistics Office released “Andorra in Figures”.
- Tourist flow data improved.
- Remaining needs:
- Continue improving compilation and clearly report revisions to National Accounts.
- Fill statisticians’ positions as soon as feasible.
- Produce more timely and comprehensive expenditure-based GDP to better understand private investment.
- Timely data on personal and corporate income to strengthen revenue estimates and enable in-year budget adjustments.
- Combine high-frequency data with National Accounts information to improve near-term GDP projections and shock assessments (e.g., road closures).
Andorra: Selected Economic and Social Indicators
- I. Social Indicators
- Population (2025): 89,058
- Population at risk of poverty (percent, 2024): 16.4
- Per capita income (2025, euros): 44,165
- Human Development Index Rank (2023): 32 (out of 193)
- Gini Index (2024): 38.4
- Life expectancy at birth (2024): 84.1
- II. Economic Indicators — Selected series and projections
- Real GDP (percent):
- 2023: 2.6
- 2024: 3.8
- 2025: 2.9
- 2026: 2.3
- 2027: 1.9
- 2028: 1.7
- 2029: 1.6
- 2030: 1.5
- Nominal GDP (percent growth):
- 2023: 9.0
- 2024: 6.7
- 2025: 5.3
- 2026: 4.5
- 2027: 3.9
- 2028: 3.7
- 2029: 3.6
- 2030: 3.5
- GDP deflator:
- 2023: 6.3
- 2024: 2.8
- 2025: 2.2
- 2026: 2.0
- Inflation (percent, period average):
- 2023: 5.6
- 2024: 3.1
- 2025: 2.4
- Inflation (percent, end of period):
- 2023: 4.6
- 2024: 2.7
- Unemployment rate (percent, period average):
- 2023: 1.1
- 2024: 1.2
- 2025: 1.3
- Current account (percent of GDP):
- 2023: 14.2
- 2024: 15.9
- 2025: 16.0
- 2026: 16.1
- 2027: 16.2
- Balance on goods and services (percent of GDP):
- 2023: 12.0
- 2024: 15.8
- 2025: 15.7
- Exports of goods and services (percent of GDP):
- 2023: 83.7
- 2024: 89.8
- 2025: 90.0
- 2026: 89.7
- 2027: 89.9
- 2028: 90.1
- 2029: 90.2
- Imports of goods and services (percent of GDP):
- 2023: 71.8
- 2024: 73.9
- 2025: 74.3
- 2026: 74.0
- 2027: 74.1
- 2028: 74.2
- Gross international reserves (mil of euros) 1/:
- 2023: 339
- 2024: 402
- 2025: 397
- Note: In 2024, an additional €60 million in reserves were deposited at the Bank of Spain.
- Fiscal sector — General government (percent of GDP)
- Revenue:
- 2023: 38.0
- 2024: 39.9
- 2025: 40.7
- 2026: 40.1
- 2027: 40.3
- Expenditure:
- 2023: 35.9
- 2024: 37.1
- 2025: 37.4
- 2026: 38.2
- 2027: 38.5
- 2028: 38.6
- Interest:
- 2023: 0.6
- 2024: 0.5
- 2025: 0.7
- 2026: 0.8
- Primary balance:
- 2023: 3.3
- 2024: 2.5
- Net lending/borrowing (overall balance):
- 2023: 2.1
- 2024: 1.8
- Public debt (percent of GDP):
- 2023: 35.4
- 2024: 32.9
- 2025: 30.7
- 2026: 28.5
- 2027: 27.5
- 2028: 26.8
- 2029: 26.2
- 2030: 25.6
- 2031: 25.0
- Central Government (selected percent of GDP series)
- (series entries as reported in source; central government comprises Govern d'Andorra and nonmarket, nonprofit institutional units)
- Example entries:
- 19.8, 21.4, 22.9, 21.7, 21.9, 19.1, 20.2, 20.4 (as reported)
- Banking sector 4/ (levels and notes)
- Credit to nonfinancial private sector (percent of GDP):
- 2023: 101.3
- 2024: 95.5
- 2025: 91.6
- Corporates (percent of GDP):
- 2023: 55.1
- 2024: 51.8
- 2025: 49.4
- Households (percent of GDP):
- 2023: 46.2
- 2024: 43.7
- 2025: 42.2
- Growth (nominal) of credit to nonfinancial private sector:
- 2023: -5.2
- 2024: -2.8
- 2025: 3.4
- 2026: -7.8
- 2027: 1.0
- 2028: 4.0
- Credit to public sector (growth, percent):
- 2023: -10.0
- 2024: -23.8
- 2025: -26.7
- Regulatory capital to risk-weighted assets:
- 2023: 20.5
- 2024: …
- Nonperforming loans to total gross loans: (data not reported in source table)
- Memorandum items:
- Exchange rate (€/USD, period average):
- 2023: 0.92
- 2024: 0.89
- 2025: 0.86
- 2026: 0.85
- Nominal GDP (millions of euros):
- 2023: 3,501
- 2024: 3,736
- 2025: 3,933
- 2026: 4,111
- 2027: 4,271
- 2028: 4,430
- 2029: 4,591
- 2030: 4,753
- 2031: 4,921
- Output gap (percent):
- 2023: 1.4
- Notes and data caveats:
- Data for 2025 is as of Q3 and are preliminary, unaudited, and subject to revisions.
- The general government comprises the central government, local governments and the social security fund.
- The central government comprises Govern d'Andorra, as well as nonmarket, nonprofit institutional units.
- The table reports the exchange rate €/USD because Andorra is a euroized economy.
IMF Staff Concluding Statement of the 2026 Article IV Mission to Andorra.
Content in this bundle
- Principat d’Andorra: Declaració Final de la Missió de la Consulta de l’Article IV de 2026