Tourism and Spain Drive Andorra’s Economy, Says New IMF Nowcasting Study

The International Monetary Fund (IMF) has unveiled a new study showing how real-time data can help estimate Andorra’s economic growth long before official GDP figures are released. The report, prepared by IMF economist Mariarosaria Comunale, explores how high-frequency indicators such as tourism flows, retail sales, electricity consumption, and imports can be used to “nowcast” the economy, a method that provides an early estimate of GDP growth before traditional national accounts become available.

The research, developed with techniques widely used in IMF and European Central Bank studies, highlights how small economies like Andorra need faster tools to monitor economic conditions. Official GDP data are usually published with delays, making it difficult for policymakers to respond quickly to changing conditions. The IMF argues that high-frequency data can fill this gap by offering a more immediate picture of economic activity.

Tourism and Spain Hold the Key

The study confirms that tourism remains the backbone of Andorra’s economy. Rising tourist arrivals, hotel activity, and retail trade were all found to be strong signals of economic growth during 2025. Electricity consumption in hotels and restaurants also provided useful clues about business activity, especially during peak tourism periods.

The IMF report also reveals how dependent Andorra is on neighboring countries, particularly Spain. Statistical analysis showed that Andorra’s economic growth closely follows developments in Spain and France, with Spain emerging as the strongest external influence. According to the study, Spain’s GDP growth was the single most important factor in predicting Andorra’s short-term economic performance.

This reflects the close economic ties between the two countries, including tourism, shopping, trade, and labor movement. The report suggests that when Spain’s economy performs well, Andorra usually benefits almost immediately.

How the IMF Built the Model

To estimate growth in real time, the IMF used a mixed-frequency dynamic factor model, a sophisticated statistical system that combines quarterly GDP figures with a large number of monthly indicators. Instead of relying on one or two economic variables, the model analyzes dozens of signals at the same time to identify hidden trends driving the economy.

The dataset used in the study covered the period from 2015 to late 2025 and included around 110 indicators. These ranged from tourism numbers and retail trade to salaries, employment, consumer prices, imports, vehicle registrations, and electricity usage.

The report also tackled one major challenge: the COVID-19 pandemic. Pandemic-related disruptions created unusually large swings in economic data, which could distort forecasts. To avoid this, the IMF adjusted the model by isolating the extreme volatility of the pandemic years, allowing the system to produce more stable and realistic estimates.

Growth Estimates Point to a Stable Economy

Using data available up to November 2025, the IMF estimated that Andorra’s economy grew by about 2.75 percent year-on-year in the fourth quarter of 2025. The model also projected growth of around 2.6 percent for the first quarter of 2026.

The study compared several alternative versions of the model to test accuracy. Some included additional indicators for construction, financial services, or retail employment, while others removed Spain’s GDP growth entirely. The baseline model consistently performed best.

One of the clearest findings was the importance of Spain’s economy. When Spanish GDP growth was excluded, the accuracy of the forecasts dropped sharply and estimated growth rates weakened significantly. France’s GDP, meanwhile, added little extra information once Spain was already included.

Real-Time Data Could Shape Future Policymaking

Beyond estimating GDP, the IMF framework can also test the impact of unexpected events. The study examined a scenario involving the temporary closure of the road at Pas de la Casa in early 2026, a disruption that affected visitor flows into Andorra. Assuming a 10 percent decline in visitors during January and February, the model estimated that economic growth would slow slightly from 2.6 percent to 2.4 percent.

The IMF believes this type of real-time analysis could become increasingly valuable for governments and central banks. For Andorra, where tourism and external demand can shift rapidly, the ability to monitor the economy continuously may help authorities react faster to shocks and improve economic planning.

At the same time, the study highlights gaps in Andorra’s data system, especially in measuring construction activity. Existing indicators only partially capture the sector’s contribution, meaning real economic growth could sometimes be underestimated. The IMF concludes that improving high-frequency data collection will strengthen Andorra’s ability to monitor and manage its economy in the years ahead.