Principality of Andorra: 2025 Article IV Consultation-Press Release; and Staff Report

The 2025 Article IV Consultation discusses that the Andorra economy continues to be resilient and to grow above its long-term potential. Growth in 2024 surprised on the upside at 2.1 percent, driven by the service, banking and construction sectors. Early fiscal reform is paramount. Pension expenditures will increase by 6.7 percentage points while healthcare expenditures will increase by 2 percentage points by 20250. Concluding the pension reform in an expeditious and comprehensive manner is needed to ensure the sustainability of the social security fund in the long run. Ambitious structural reforms can help unlock investment and lift productivity, support the diversification of the economy, and help mitigate climate change. A comprehensive set of reforms should first address frictions, notably labor and housing shortages. Establishing a business environment conducive to higher investment is key, notably by reducing administrative rigidities associated with doing business in Andorra. Finally, the authorities should support the development of higher value-added services and sectors, including the digital economy.