Andorra Economy

Andorra Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

Andorra was traditionally an agricultural country, but in recent years GDP has mainly been made up of the service sector (tourism, banking) and trade.

The economic slump associated with the covid-19 pandemic also fundamentally affected Andorra, but in 2021 a turn to positive numbers can already be observed. Check ebizdir for economical facts of Andorra.

The recovery after the crisis year of 2020 can be observed both in the increase of GDP by more than 20% and in the reduction of unemployment.

In recent years, the conclusion of agreements on the prevention of double taxation with Spain and other countries or the introduction of personal income tax have been key – Andorra thus fulfilled the EU’s requirement and opened the way for the start of negotiations on the Association Agreement.

In its analysis of Andorra, Standards & Poor draws attention to the still prevailing vulnerability of the banking sector (in the context of its important role in the creation of GDP) and positively evaluates the consolidation of the government’s economic policy and the latest tax reform.

Andorra is not one of the countries facing the problem of unemployment, which is now approaching 2%, which is well below average in the European context. In periods exposed to tourism (except for 2020 and 2021), the country faced a shortage of skilled labor.

Due to its area and production structure, Andorra traditionally shows a negative trade balance: it is dependent on the import of a number of products and, on the contrary, exports only a limited amount of products. Its main products include rye, wheat, barley, oats, vegetables, tobacco, sheep and cattle. The economy is therefore vulnerable to changes in fuel and food prices. Moreover, a large part of exports is re-export.

In 2022, Andorra broke its neutrality for the first time and accepted a series of international sanctions in the context of the war in Ukraine.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 2.5 -10.3 12.1 7.1 ON
GDP/population (USD/PPP) ON ON ON ON ON
Inflation (%) 1 -0.1 3.3 ON ON
Unemployment (%) 1.8 2.9 2.2 ON ON
Export of goods (billion USD) 0.128 0.163 0.159 ON ON
Import of goods (billion USD) 1,543 1,497 1,499 ON ON
Trade Balance (Billion USD) -1.415 -1.334 -1.34 ON ON
Industrial production (% change) ON ON ON ON ON
Population (millions) 0.1 0.1 ON ON ON
Competitiveness ON ON ON ON ON
OECD export risk ON ON ON ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) 1
Public debt (% of GDP) 46.33
Current account balance (billion USD) ON
Taxes 2022
F.O 10%
VAT 4.5%

Since 2015, thanks to the implementation of tax reforms, it has been possible to radically increase the revenues of the state budget, which ensured a positive budget balance.

Since 2016, the government has been able to keep the budget balanced, thanks to, among other things, income from the newly introduced personal income tax.

Andorra was traditionally an agricultural country, but in recent years GDP has mainly been made up of the service sector (tourism, banking) and trade.

In the years 2012-2014, the growth of the Andorran economy was negatively affected by the economic crisis in Spain, to whose market Andorra is traditionally very strongly tied.

Along with the gradual recovery of the Spanish economy, the outlook for the Andorran economy has also improved. Although 2019 showed good economic results, 2020 and the crisis associated with the covid-19 pandemic also significantly affected Andorra.

In 2020, there was a drop in GDP of more than 10% due to the pandemic, but in 2021 the Andorran economy is already recording economic growth of 12.1% of GDP.

Banking system

The banking sector is one of the most developed in Andorra and is still the source of up to 16% of the country’s wealth. Until recently, Andorra was one of the tax havens and deposits from abroad were significant.

Since 2009, when Andorra signed the so-called Paris Declaration with France (at the instigation of Brussels’ recommendations regarding the strengthening of the regulation of the banking sector and greater opening of the country to foreign countries) and bilateral agreements with a number of countries on the exchange of banking information, it is no longer considered a tax haven.

In 2011, Andorra also signed an agreement with the EU, which allows it to print the euro from 2013 and generally bring the banking sector closer to European standards.

At the beginning of 2015, the Banca Privada d’Andorra (BPA) case shook the Andorran banking sector. The crisis was triggered by accusations of American institutions of money laundering by criminal organizations and non-transparent transactions. The Andorran government announced in April 2015 that it was creating a bad debt restructuring “bank” (AREB) to take over BPA’s toxic loans linked to its dirty banking practices. Other assets were transferred to Vall Bank.

From 1/1/2017, an agreement on the automatic exchange of tax information is in force, which all Andorran banks must comply with.

Five banking houses operate in Andorra: Andbank, Grup Crèdit Andorrà, MoraBanc, Vall Banc and BancSabadell d’Andorra.

Planned reforms and international trends towards the globalization of the banking sector led two of the Andorran banks (Andbank, Grup Crèdit Andorrà) to open their activities abroad, especially in Spain.

The main Andorran bank is Crèdit Andorra, which was also awarded as the country’s best banking group in 2017-2021 and became the first Andorran bank to appear on the prestigious list of the most awarded private banks by the Financial Times The Banker y PWM with the Global Private Banking Awards. The jury particularly appreciated the bank’s international level (representation in 10 countries) and its stability and long-standing strong position on the financial market (liquidity 59.35%, solvency 17.8%).

Crèdit Andorra offers the services of a commercial private bank for Andorra and abroad, it has branches in Spain, Luxembourg, Switzerland, the USA and Mexico, among others.

Tax system

In response to the global financial crisis of 2008, Andorra took a number of major steps to reform its economic and financial system. These were aimed at strengthening the resilience and competitiveness of the economy, consolidating the budget policy or attracting foreign investors.

The main goal was to rid the country of the label of a “tax haven” by introducing measures for greater transparency of bank flows and better exchange of tax information (AD adopted a number of international regulations, standards and norms into its legislation, including some important EU regulations, and joined the international efforts in the fight against terrorism, money laundering or corruption).

However, the implementation of stricter legislation and the introduction of institutional supervision in the area of ​​tax policy and bank flows also brought with it a non-negligible decrease in income sources for AD, as some clients moved to “safer” tax havens.

In 2013, the first ever bilateral agreement with the Czech Republic was signed – the Agreement on the Exchange of Information in Tax Matters.

In 2016, Andorra concluded an agreement with the EU on fiscal transparency, which should prevent tax evasion by EU citizens on Andorran territory. Part of the tax reform was the implementation of new taxes, both direct and indirect, based on the recommendations of the EU and the IMF.

Companies have been paying 10% income tax in Andorra since 2012.

In 2013, the country also introduced a uniform VAT rate of 4.5% and a reduced VAT of 1% (some basic foodstuffs, water, medicines and health services).

In 2015, personal income tax was introduced. Persons with an income of up to 24,000 euros a year do not pay income tax, between 24,000 and 40,000 euros a year they pay an income tax of 5%, persons receiving a larger amount then pay 10%.

Banking and financial services are subject to an 8% tax regime.

Between 2016 and 2020, the country concluded a number of agreements to avoid double taxation. This agreement is expected to be concluded with the Czech Republic in 2022.

In December 2018, the EU decided to remove Andorra from the so-called black list of tax havens.

In 2020, Andorra joined the International Monetary Fund.

Andorra Economy