Housing squeeze and fast population growth threaten Andorra’s economic expansion

Andorra’s recent expansion has kept the economy active and employment high, but business leaders at the 23rd Forum of the Andorran Family Business warned that fast population growth and a shortage of affordable homes are creating mounting pressures on recruitment, services and public infrastructure. Participants said growth has sometimes been high in volume but not always in quality or value added, and urged clearer long‑term planning to align demographic trends with housing and economic policy.

Daniel Armengol, outgoing president of the EFA, described the country’s rise as uneven and potentially unsustainable, saying Andorra has “taken off like a rocket” rather than grown steadily like an aircraft. He warned that the population increase—he noted that many newcomers are not necessarily part of the active workforce—has amplified social strains and prompted some traditional businesses and families to sell assets and invest abroad. The association called for a shared model of the country and government support to help firms adapt to forthcoming changes linked to the EU association process.

The EFA’s vice‑president, Daniel Aristot, urged businesses to be creative and adaptable in the fast‑changing international context, listing rising inflation, energy costs and trade frictions among the external challenges affecting local firms. Economists at the forum, including Xavier Vives of IESE, recommended diversification, higher productivity and adoption of new technologies such as artificial intelligence to raise resilience and add value to the economy.

Speakers also debated deeper ties with the European Union. Ignacio Molina, a political scientist at the Real Instituto Elcano, argued that small advanced states that joined the EU market have tended to improve their relative prosperity, citing cases such as Luxembourg, Cyprus and Malta. He said association with the EU could consolidate democratic institutions, normalise Andorra’s international image and ease mobility for citizens. At the same time, Molina and other experts acknowledged trade‑offs: closer alignment with EU rules would bring obligations that could reshape sensitive sectors such as banking and tourism and would require concessions on regulatory autonomy.

Government officials attending the forum stressed parallel work on security and administration while pursuing closer EU ties. Justice and Interior Minister Ester Molné said negotiations on a border‑management agreement with the EU are “very advanced” and could be finalised before year‑end; the pact, linked to the recently completed association accord, is expected to include mechanisms for cross‑border police cooperation with Spain and France. The ministry has completed recruitment for eight police positions, launched a competition to fill 15 additional posts, and is preparing substantial revisions to the Penal Code and the Criminal Procedure Code to adapt to evolving crime patterns and speed up prosecutions.

Participants outlined several policy paths to address housing and labour constraints, each with trade‑offs. One approach favours accelerating construction by streamlining permitting, increasing administrative capacity and allowing greater density where appropriate to boost supply quickly. Another would restrict population growth to ease housing demand, a politically sensitive option that could exacerbate labour shortages. A third would expand temporary labour programmes while limiting automatic family reunification to contain housing pressure, a measure that raises significant social and political concerns and would require careful design.

Forum speakers and officials agreed that restoring balance will require a coherent, long‑term growth strategy tying housing policy, labour‑market design and the tourism model to demographic realities. They called for well‑communicated reforms, stable regulation to rebuild investor and citizen confidence, and targeted measures to increase housing supply without undermining competitiveness. Without a shared roadmap, they warned, pressures on housing, recruitment and public services are likely to intensify even as the economy remains buoyant.