Andorran Businesses Warn Surging Oil Costs Threaten Profits and Growth Amid Middle East Tensions

Andorran businesses are voicing growing concerns over surging transport costs linked to recent oil price hikes, which are eroding profit margins and threatening economic competitiveness.

Companies dependent on logistics report difficulties in projecting expenses amid the volatility. Many had secured contracts or budgets at earlier, lower rates, leaving them to shoulder unplanned cost increases that cannot always be passed on to clients. This is narrowing margins on current operations, triggering repeated cost reviews for future projects, and risking supply chain disruptions, including delays, contract renegotiations, or even project cancellations. The sector urges government intervention to restore stability, citing Spain's fuel tax reductions for specific industries as an example. Without relief, firms warn, Andorra's expansion could falter.

Finance Minister Ramon Lladós said the government is closely tracking fuel and fresh food prices in response to Middle East tensions, particularly the Strait of Hormuz closure following strikes by Israel and the United States on Iran. These developments have spiked oil and other key commodity costs, hitting Andorra's open economy hard. Inflation climbed to 4.1% in March, exceeding rates in Spain and France, though still below the highs seen at the start of the Ukraine war.

No decisions on measures have been taken, but Lladós confirmed officials will reassess the situation this week, including data from fuel importers highlighting lost competitiveness against Spain's tax cuts. He stressed that current pressures fall short of Ukraine war levels and indicated action would follow "if needed." Fuel importers have submitted analyses pressing for compensation to address the price gap with neighbors.

The International Monetary Fund has held Andorra's growth projections steady, unlike downward revisions for Spain. Lladós noted officials will attend next week's spring meetings for any updates, adding there is currently no forecast of cuts.