IMF Warns Andorra Economy Slowing to 1.5% Growth by 2030 Amid Inflation Spike

The International Monetary Fund (IMF) has warned that Andorra's economy has entered a phase of sustained slowdown, with growth expected to moderate progressively after two years of stronger-than-anticipated expansion. According to the IMF report, gross domestic product growth will drop from 3.9% in 2025 to 2.1% in 2026, settling around 1.5% by roughly 2030—a level the organisation views as the economy's potential.

This shift follows recent dynamism driven by financial services, construction and real estate. External pressures account for much of the cooling, including the Middle East conflict, higher energy and import costs, which could dampen demand from key trading partners and hit tourism, retail and restaurants hardest. Andorra's structural exposure to cross-border infrastructure disruptions adds to the vulnerability.

Domestically, momentum from population inflows and construction booms is fading, while tourism operates near capacity, limiting further gains. Inflation remains elevated amid this deceleration: after easing in 2025, it is projected to approach 3% in 2026 before aligning with European targets. This mix could constrain economic flexibility.

Longer-term risks include population ageing, which will raise pension and healthcare spending; housing shortages exacerbating labour shortages; and climate change threatening ski tourism through warmer temperatures and less snow. The IMF urges structural reforms to boost productivity, affordable housing and new sectors. It also sees the EU association agreement as a chance to enhance resilience, despite transition costs.

Separately, April's advanced consumer price index (CPI) estimate reached 4.9% year-on-year, up eight tenths from March's 4.1%, according to the statistics department. The rise stems mainly from higher transport costs, particularly fuels, with lesser contributions from food and non-alcoholic beverages. Housing, utilities and miscellaneous goods and services tempered the increase. Monthly change stood at 1.2%.

This marks the highest rate since November 2023 (5%), though below the 2022 peak of 7.6% tied to the Ukraine conflict. Andorra's figure exceeds neighbours: Spain's advanced CPI at 3.2% (down two tenths) and France's at 2.2% (up five tenths). The estimate covers about 97% of prices; final data is due on 14 May.