IMF Executive Board Concludes 2026 Article IV Consultation with Andorra
May 4, 2026
The Andorran economy continued to outperform expectations with growth surprising on the upside in 2025.
Growth is projected to moderate and inflation will remain elevated in 2026 due to the war in the Middle East.
In the absence of policy action, growth could be lower over the medium term and population aging will increase public expenditures on pensions and healthcare.
Washington, DC: On April 27, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Andorra.[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]The Andorran economy continued to outperform expectations. Growth in 2025 surprised on the upside for the second consecutive year, at an estimated 3.9 percent, driven by strong activity in financial services, real estate, and construction. Inflation eased to 2.4 percent in 2025 but is on an upward trend, while labor market is operating at near full employment. The current account surplus remains very large, estimated at 15.9 percent of GDP in 2025.
Growth is projected to slow to 2.1 percent in 2026 and then steadily converge to its long run potential of 1.5 percent by 2030. Inflation is projected at around 3 percent in 2026 before converging to the euro area inflation target of 2 percent by the end of 2027. Staff’s baseline assumes oil and gas prices that are broadly consistent with closing future prices as of mid-March 2026 and incorporates the impact on main trading partners. Risks to the growth outlook are tilted to the downside with short-term risks mainly stemming from external factors. Weaker growth among trading partners due to prolonged war in the Middle East or new trade tensions could weigh on foreign demand and push inflation higher through import prices. Recent temporary road closures underscore Andorra’s vulnerability to disruptions in cross-border infrastructure.
Absent timely reforms, medium-term growth could be lower. In the absence of policy action, population aging will increase public expenditure on pensions and healthcare, placing growing pressure on public finances. Labor shortages could worsen if housing affordability is not improved. 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 EU Association Agreement represents an upside risk by supporting economic diversification and enhancing resilience to shocks.
Directors agreed with the thrust of the staff appraisal. They welcomed Andorra’s continued economic resilience and prudent fiscal management, which supported growth and allowed rebuilding of solid buffers. Directors noted, however, that near‑term risks stemming from the war in the Middle East are expected to moderate near‑term growth and exert upward pressure on inflation. They also emphasized that medium‑ to long‑term challenges could additionally weigh on growth and fiscal sustainability. In this context, Directors encourage the authorities to maintain a balance between prudent fiscal management and growth‑enhancing reforms while keeping continued vigilance over the financial system.
Directors welcomed the authorities’ prudent fiscal management, which has resulted in sustained surpluses and a declining public debt ratio. They agreed that the looser fiscal stance in 2026 is broadly appropriate against the backdrop of slowing growth, while stressing the importance of standing ready to tighten the stance if price pressures persist. Over the medium term, Directors emphasized that maintaining prudent fiscal policy remains essential in a euroized economy. They encouraged the authorities to make effective use of available fiscal space for well‑targeted, growth‑enhancing public investment. Directors underscored the importance and urgency of timely pension and healthcare reforms to address population aging and safeguard long‑term fiscal sustainability.
Directors welcomed the assessment that the financial sector remains strong, noting banks’ solid profitability, capitalization, and liquidity. They looked forward to the upcoming Financial Sector Assessment Program as an opportunity to assess vulnerabilities and reinforce financial sector resilience. They commended the efforts to make AML/CFT supervision increasingly risk‑based.
Directors emphasized the importance of advancing structural reforms to lift potential growth, enhance productivity, and diversify the economy. They welcomed the authorities’ efforts to deepen regional integration and highlighted the potential benefits of the European Union Association Agreement in supporting diversification, improving market access, and attracting investment, while noting associated transition costs requiring close monitoring. Directors encouraged continued progress in implementing the National Plan for Innovation and Diversification and strengthening public‑private collaboration.
Directors welcomed recent improvements in data compilation, timeliness, and dissemination, including progress on external sector statistics and tourists flow data. They encouraged further efforts to close remaining data gaps to strengthen policy analysis and decision‑making.
Gross international reserves (millions of euros) 1/
338.4
338.7
402.1
397.2
397.2
397.2
397.2
397.2
397.2
397.2
FISCAL SECTOR
(percent of GDP, unless otherwise indicated)
General Government 2/
Revenue
39.7
38.0
39.9
40.7
40.1
40.2
40.2
40.2
40.2
40.2
Expenditure
34.9
35.9
37.1
37.2
37.8
38.4
38.3
38.3
38.3
38.5
Interest
0.7
0.6
0.5
0.5
0.5
0.7
0.7
0.6
0.7
0.8
Primary balance
5.6
2.7
3.3
4.0
2.7
2.5
2.5
2.5
2.5
2.5
Net lending/borrowing (overall balance)
4.8
2.2
2.8
3.5
2.2
1.9
1.9
1.9
1.9
1.7
Public debt
38.9
35.4
32.9
30.3
28.0
26.9
26.3
25.7
25.1
24.5
Held by domestic banking sector
Central Government 3/
Revenue
21.7
19.8
21.4
22.6
21.3
21.5
21.5
21.5
21.5
21.5
Expenditure
18.7
19.1
20.2
20.2
21.0
21.4
21.4
21.4
21.4
21.6
Interest
0.7
0.5
0.5
0.4
0.4
0.5
0.5
0.5
0.5
0.7
Primary balance
3.6
1.2
1.7
2.9
0.7
0.6
0.6
0.6
0.6
0.6
Net lending/borrowing (overall balance)
2.9
0.7
1.2
2.4
0.3
0.1
0.1
0.1
0.1
-0.1
Public debt
37.1
34.0
31.8
29.4
27.4
26.3
25.6
25.0
24.4
23.8
BANKING SECTOR 4/
(percent, unless otherwise indicated)
Regulatory capital to risk-weighted assets
20.3
21.7
21.7
20.5
…
…
…
…
…
…
Nonperforming loans to total gross loans
3.3
2.2
1.9
2.0
…
…
…
…
…
…
Credit to nonfinancial private sector
Level (percent of GDP)
116.4
101.3
95.5
90.5
…
…
…
…
…
…
Corporates
61.8
55.1
51.8
48.8
…
…
…
…
…
…
Households
54.6
46.2
43.7
41.7
…
…
…
…
…
…
Growth (nominal)
-1.7
-5.2
0.7
3.7
…
…
…
…
…
…
Corporates
2.6
-2.8
0.4
3.4
…
…
…
…
…
…
Households
-6.1
-7.8
1.0
4.0
…
…
…
…
…
…
Credit to public sector
Level (percent of GDP)
2.2
1.8
1.3
1.0
…
…
…
…
…
…
Growth (nominal)
-8.4
-10.0
-23.8
-26.7
…
…
…
…
…
…
Memorandum items
Exchange rate (€/USD, period average) 5/
0.95
0.92
0.92
0.89
0.86
0.86
0.86
0.86
0.86
0.85
Nominal GDP (millions of euros)
3,210
3,501
3,736
3,983
4,181
4,351
4,514
4,678
4,843
5,014
Output gap
7.0
1.5
2.9
2.4
0.8
0.7
0.5
0.3
0.0
0.0
Sources: Andorran authorities, Eurostat, and IMF staff calculations.
1/ Gross international reserves in 2022 include €100 million deposited at the Bank of Spain, €40 million at the Banque de France, and €60 million at the Nederlandsche Bank. In 2024, additional €60 million reserves were accounted, mainly deposited at the Bank of Spain.
2/ The general government comprises the central government, local governments and the social security fund.
3/ The central government comprises Govern d'Andorra, as well as nonmarket, nonprofit institutional units.
4/ Data for 2025 is as of Q3 and are preliminary, unaudited, and subject to revisions.
5/ The table reports the exchange rate €/USD because Andorra is a euroized economy.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/en/countries/and page.
[3] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
