Andorra's Economy Grows 2.2% in H1 2025 Amid Tourism Boom

The Chamber of Commerce, Industry and Services of Andorra (CCIS) reports that the economy maintained solid momentum in the first half of 2025, with real GDP rising 2.2% year-on-year in the second quarter. This pace exceeds the 2018-2019 average of 1.8% but marks a moderation from 2024's stronger gains.

Robust domestic demand underpinned the performance, fueled by population increases, a strong labour market with over 7,100 jobs added since 2019, easing inflation, lower interest rates, and rising household incomes that supported consumption and investment. Unemployment held at record lows. Tourism achieved milestones, surpassing two million overnight visitors for the first time in a semester and totaling 6.3 million stays—the highest on record. Deseasonalisation advanced, with May and June seeing 19.8% more visitors and 20.5% additional hotel nights, signaling year-round draw.

Construction drove expansion, bolstered by improved financing and steady residential demand, though early signs of slowdown emerged due to labour shortages and limited buildable land, exacerbated by temporary urban planning licence suspensions during POUP reviews. Services contributed significantly, led by finance, real estate, professional and technical fields, education, and health. Tourist services entered sustainable growth at elevated levels after post-pandemic surges. Retail stagnated amid fewer day-trippers, e-commerce rivalry, and shifting consumer habits, while industry weakened despite lower energy costs.

Businesses identified key internal constraints: rising supply and material costs impacted 43.6% of firms, operating expenses worried 31.4%, and skilled worker shortages hit construction (56.3% reporting vacancies) and hospitality (50%) hardest. CCIS President Josep M. Mas noted about 1,700 unfilled jobs, tied to Schengen permit delays from EU Entry/Exit system changes and housing access issues. He advocated public-private housing partnerships, rental market deregulation, and government-backed first-home guarantees, while dismissing low wages as the cause amid inter-company poaching through salary hikes. Broader pressures include high living costs, infrastructure strain, and demands on public services, healthcare, and transport.

Outlooks for the second half of 2025 remain optimistic, with growth expected above eurozone averages, propelled by construction, services, tourism resilience, and consumption—though tourism projections have softened toward normalisation. For 2026, expansion should continue but with progressive deceleration. US-EU tariff deals mitigate some global risks, but persistent uncertainty, potential protectionism escalation, inflation pressures, financial market volatility, supply chain issues, geopolitical tensions, and eurozone sluggishness could indirectly curb Andorra's progress.

The CCIS calls for enhancing productivity and competitiveness via innovation, diversification, and a quality-driven sustainable tourism model, including the national innovation plan aiming for 7-8% of public spending on R&D by 2036. Mas emphasised addressing structural imbalances like housing to sustain momentum, warning that without action, these could hinder worker inflows and business activity.