Andorran Businesses Warn of Shrinking Margins Amid Oil Surge and Strait of Hormuz Closure

Andorran businesses continue to warn of eroding profit margins due to surging transport costs from oil price spikes, as Middle East tensions, including the Strait of Hormuz closure following Israeli and US strikes on Iran, drive up fuel and fresh food expenses.

Logistics-dependent firms struggle with unpredictable outlays, having locked in contracts at lower rates and now facing surcharges they cannot easily pass on. This disrupts planning, prompts cost reviews, and risks supply delays or project halts. Groups urge government action for stability, citing Spain's fuel tax cuts as a benchmark amid March inflation of 4.1%, higher than in Spain or France but below early Ukraine war levels.

Finance Minister Ramon Lladós said the government is closely monitoring fuel and fresh food prices in Andorra's open economy, which feels global shocks acutely. No decisions have been taken, as current pressures fall short of Ukraine war peaks, but officials will reassess fuel importers' analyses this week in cabinet to weigh potential steps. "We will see if any action is needed," Lladós stated, adding that the issue returns to the table soon.

In parliament, responding to Social Democrat councillor Pere Baró, Lladós stressed any aid must target affected sectors and households precisely, not broadly. Andorra's low taxes—4.5% IGI on petrol and 1% on food—limit options like Spain's VAT reductions, he noted, but the executive tracks developments for tailored responses if warranted.

The IMF has not cut Andorra's growth outlook, unlike Spain's downward revision from 2.8% to 2.1% for next year. Lladós said officials will seek updates at the Fund's spring meetings next week, with none anticipated yet. Prolonged volatility threatens Andorra's expansion, though officials emphasize prudence over haste.