IMF Praises Andorra's 3.9% Growth in 2025 but Forecasts Slowdown to 2.1%

The International Monetary Fund (IMF) released its final report on Monday for the 2026 Article IV consultation, reviewing Andorra's 2025 economic performance and outlining medium- to long-term prospects.

The report praises the ongoing strength of the Andorran economy, which expanded by around 3.9% last year, exceeding initial forecasts. This performance was driven mainly by resilient traditional sectors such as tourism and finance, alongside positive contributions from other areas. The labour market remains near full employment, with an unemployment rate of about 2.6%. Year-end inflation eased to 2.7% in 2025, following 2.6% in 2024.

Despite these positive indicators, the IMF anticipates a gradual slowdown, projecting growth of roughly 2.1% for 2026. This outlook reflects stabilising tourism, growth in construction, and reduced momentum elsewhere.

The organisation highlights several structural challenges that could hinder medium-term expansion, including low productivity in traditional sectors—which underscores the need for economic diversification—limited access to housing, and population ageing. The latter will place growing strain on public finances, particularly in pensions and healthcare, requiring future reforms.

On healthcare, the IMF notes the system's efficiency and strong outcomes in health access, but warns of rising costs due to ageing and more specialised treatments. Public health spending is expected to climb from 6% of GDP in 2025 to 6.8% in 2030 and 7.4% in 2035.

To address this, the IMF urges Andorra to pursue ongoing efforts to enhance healthcare management. Priorities include boosting efficiency in hospital and pharmaceutical spending, better handling of chronic conditions, stronger primary care, and optimising resources for services like temporary disability benefits and invalidity claims.

The report also emphasises international cooperation and Andorra's integration process with the European Union as opportunities to diversify the economy, attract high-quality investment, and build resilience against external shocks. It acknowledges, however, that this will involve short-term transition costs and regulatory adjustments.

This final assessment aligns with the preliminary report issued on 9 March, following an IMF expert mission to the country.