March 9, 2026
PRESS OFFICER: Boris Balabanov
Phone: +1 202 623-7100Email: MEDIA@IMF.org
A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
Andorra La Vella: The Andorran economy continued to exhibit robust growth driven by external demand and a prospering financial sector. This economic strength combined with cautious fiscal management has translated into a strong fiscal performance, reinforcing fiscal buffers. Banks continued performing well, but their large size warrants ongoing close supervision. Challenges including low productivity and lack of affordable housing will put downward pressure on growth over the medium term and aging will strain public finances. The European Union Association Agreement (EUAA) would deepen integration into the EU’s single market and diversify Andorra’s sources of growth but there will be transition costs and the exact timeframe for ratification remains uncertain. Reforms to the public pension and healthcare systems are needed to make them sustainable.
Economic Outlook
The Andorra economy continued to outperform expectations. Growth in 2025 surprised on the upside for the second consecutive year, at an estimated 2.9 percent, driven by strong activity in financial services, real estate, and construction. Inflation eased from an average of 3.1 percent in 2024 to 2.4 percent in 2025. The labor market is operating at near full employment, while the current account surplus remains very large, estimated at 16 percent of GDP in 2025. Strong overperformance in direct taxes drove a higher-than-expected estimated central government surplus of 2.5 percent of GDP in 2025 contributing to a reduction in central government debt to below 30 percent of GDP in 2025.
Growth is projected to moderate and converge towards its potential over the medium term. Growth is projected to slow to 2.3 percent in 2026 and then steadily converge to 1.5 percent by 2030, as momentum from inbound immigration and related construction subsides, and tourism growth eases given Andorra’s already high number of visitors per capita. Inflation picked up recently with a flash estimate of 3.1 percent, year-on-year, in February mostly due to temporary factors. It is projected to decline to 2.3 percent in 2026 before converging to the euro area inflation target of 2 percent by 2027, reflecting lower import prices in line with developments in its main trading partners.
Short-term risks are broadly balanced with downside risks mainly stemming from external factors. As a highly open and fully euroized micro-state dependent on tourism and retail trade, Andorra remains exposed to external shocks and global uncertainty. While it is too early to estimate the impact of the latest geopolitical and trade tensions, weaker growth among trading partners could weigh on foreign demand. Global shocks could also push inflation higher through import prices. Recent temporary road closures underscore Andorra’s vulnerability in terms of cross-border infrastructure. On the upside, external demand could be more resilient and grow faster than expected.
Absent timely reforms, growth could well be lower over the medium term. In the absence of policy action, population aging will increase public expenditures on pensions and healthcare, placing growing pressure on public finances. Labor shortages could worsen if housing affordability is not improved, negatively affecting output and potentially reducing investment. Climate change poses additional risks, as rising temperatures and more frequent extreme weather events may cause more frequent disruptions in the tourism sector and infrastructure, putting additional emphasis on continuing diversification efforts. Approval of the EUAA represents an upside risk by supporting economic diversification and enhancing resilience to shocks.
Policy priorities
With the right policies, Andorra can sustain growth and address looming challenges. With elections planned for 2027, it is important that the government continues to implement its reform agenda. Undertaking an overdue comprehensive pension reform will ensure sustainability of the pension system and pave the way for other structural reforms.
Maintaining a balance between prudent fiscal management and growth-enhancing reforms
The near-term focus is on social priorities and closing the public-sector wage gap.
Over the medium term, fiscal policy should balance buffer accumulation with growth-enhancing use of fiscal space, while preserving debt sustainability.
Maintaining financial sector buffers commensurate with its risk profile
While recent financial results have been strong, banking assets remain large relative to the economy constituting a systemic risk. The Andorran banking sector has delivered consistently sound results in recent years, supported by a regulatory and supervisory framework increasingly aligned with EU standards under the Andorran Financial Authority (AFA). The EUAA would further enhance supervisory convergence by facilitating the exchange of information and best practices. Banks have continued to expand asset management activities abroad, primarily within the EU, strengthening income diversification. At the same time, the banking system remains very large relative to the domestic economy. Therefore, it is important for the AFA to continue its close supervision and for banks to maintain buffers commensurate with their risk profiles and cross-border activities. Preparations are underway for the Financial Sector Assessment Program (FSAP) in 2026—Andorra’s first since joining the IMF—and early capacity-building efforts by the AFA are welcome. The forthcoming FSAP will provide a valuable opportunity to assess progress and identify remaining vulnerabilities in the financial sector, including an assessment of systemic risk.
Structural reforms needed to lift potential and broaden sources of growth should focus on the following:
Continuing to strengthen data quality and coverage will help underpin sound policy design and monitoring
Progress has been made to strengthen statistical data, but there is scope to improve further. The International Investment Position and Balance of Payments annual data was published 5 months sooner than last year and quarterly series have been also published for the first time, the Statistics Office released “Andorra in Figures” to convey information to the broader audience, and tourists flow data have been improved. Recent data revisions of headline National Accounts numbers highlight the need to continue improving compilation and clearly reporting when and why revisions occur. Statisticians’ positions should be filled as soon as feasible.
Improving data quality and timeliness would strengthen the analytical foundation for policy decisions. More timely and comprehensive expenditure-based GDP would help policymakers understand private investment better, which is an area being targeted by innovation policies. Timely data on personal and corporate income could strengthen revenue estimates and allow for in-year adjustments when deviations from budgeted amounts occur.Combining available high-frequency data with National Accounts information can improve near-term projections of GDP growth and can provide timely assessments of shocks (e.g., as in the case of road closures).
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The mission thanks the authorities and all our counterparts for a constructive and candid policy dialogue, for engaging in a productive and transparent collaboration, and for their warm hospitality during the official visit of the IMF to Andorra.
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