IMF Cuts Global Growth Forecast Over Middle East Conflict, Holds Andorra Steady

The International Monetary Fund (IMF) has lowered its global growth forecast due to the conflict in the Middle East but kept its projections for Andorra unchanged.

In its latest World Economic Outlook update released last week, the IMF cut the worldwide growth estimate by two tenths of a percentage point from January's figure, to 3.1% for this year. This baseline assumes the war remains short-lived and energy commodity prices rise moderately by 19%, pushing global inflation to 4.4%—a sharp departure from recent deflationary trends.

The IMF outlined two bleaker scenarios if the conflict drags on. An intermediate case sees growth falling to 2.5% alongside 5.4% inflation. The worst outcome, if fighting extends beyond 2026, would drop growth to 2% with inflation exceeding 6%. Despite recent ceasefire announcements, the fund warned that damage has already occurred and downside risks remain high. It added that importers and developing economies would suffer most, as in past commodity price spikes.

Andorra, grouped among 17 advanced economies outside the G7 and eurozone, faces no revision. The IMF held its GDP growth forecast steady at 2.3% for 2026, matching the estimate from its recent mission to the Principality. On inflation, despite March's 2.1% price surge lifting the annual rate to 4.1%, the fund maintained its full-year average projection of 2.3%, ending at 2%.

A recent IMF delegation praised Andorra's economic strength and resilience, driven by traditional sectors and emerging activities, plus prudent fiscal management that bolstered budgets and buffers. The government confirmed 2025 GDP rose 3.9% to nearly €4 billion, though growth is expected to moderate ahead.

Andorra's finance minister Ramon Lladós, state secretary for international financial affairs Lorena Jordana, and Andorran Financial Authority director general David Cerqueda attended the IMF's spring meetings in Washington, DC, with representatives from all 190 member countries.

Discussions covered global economic outlooks amid uncertainty, debt sustainability, aid for vulnerable nations, digital transformation, and green and climate transitions. The delegation joined key ministerial sessions on climate finance and policy coordination, the International Monetary and Financial Committee plenary, and its introductory meeting.

Lladós spoke at the 15th Ministerial Meeting of the Coalition of Finance Ministers for Climate Action, reaffirming Andorra's commitment to the Paris Agreement, climate transparency, and international funding for energy transitions. The group held bilateral talks with IMF departments, the Bank of Spain, the Dutch central bank, San Marino, Liechtenstein, and IMF constituency members to strengthen institutional ties and address shared concerns.