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Andorra’s Financial Performance and Policies

Economic Performance

The COVID-19 pandemic had a significant impact on Andorra’s economic activity in 2020. However, the economy showed signs of recovery in 2021.

• The pandemic led to a decline in economic activity in 2020.
• Despite this, the economy recovered in 2021.
• Strong revenue performance, driven by tax collection, partially offset higher-than-budgeted spending on emergency support.

Fiscal Policy

Andorra’s central government deficit was estimated at 1.4% of GDP in 2021. The authorities also issued Eurobonds worth €675 million to lengthen maturity and diversify financing sources.

• Central government debt peaked at 46.2% of GDP by the end of 2021.
• The overall policy mix remained supportive in 2021, with accommodative monetary conditions from the euro area and fiscal spending expansion.

Banking Sector

Andorran banks have been resilient despite the economic challenges. However, credit growth was negative in 2021, and profitability only partially recovered.

• Profitability only partially recovered in 2021.
• Credit growth was negative in 2021.
• Non-performing loans (NPLs) declined but NPL ratios remain high.

Policy Framework

Andorra has a policy framework that imposes limits on debt, deficit, current spending, and revenue. The framework also includes an escape clause for exceptional circumstances such as the COVID-19 pandemic.

• Andorra commits to adopting strict laws against counterfeiting and money-laundering.
• The country is committed to adopting EU banking and financial sector directives.
• The policy framework allows for flexibility in times of crisis, as seen with the activation of the escape clause during the pandemic.