## IMF Executive Board Concludes 2023 Article IV Consultation with the Principality of Andorra

_IMF News, March 6, 2024_

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## Bibliographic details
- Published: March 6, 2024

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### Macroeconomic performance and recent developments
- Real GDP growth in 2023: 2.3 percent.
- Growth drivers in 2023: service sector and a record number of visitors.
- Labor market tightness: unemployment "almost no unemployment (1.2 percent at 2023Q3)".
- Inflation in 2023: 5.6 percent, driven by second-round effects from wage increases and generalized price pressure in services and imported goods.
- Housing: shortage in affordable housing noted; substantial increase in foreign residents helped match high labor demand.
- Macroeconomic buffers: described as solid and rebuilt through sound macroeconomic management.

### Outlook and projections
- Long-term potential growth (estimate): 1.5 percent.
- Real GDP growth forecasts:
  - 2024: 1.8 percent.
  - 2025 onwards: 1.5 percent.
- Inflation forecasts:
  - 2024: 4.3 percent (period average).
  - End-2025: 2 percent (projected to subside to 2 percent only by end-2025).
- Selected projections from "Andorra: Selected Social and Economic Indicators, 2020–28" (annual change, percent, unless otherwise indicated):
  - Real GDP: -11.2 (2020), 8.3 (2021), 9.6 (2022), 2.3 (2023), 1.8 (2024), 1.5 (2025), (continued series provided through 2028).
  - Nominal GDP: -10.2 (2020), 11.1 (2021), 14.2 (2022), 7.3 (2023), 4.9 (2024), 4.0 (2025), 3.3 (2026), 3.2 (2027), (2028 value listed).
  - GDP deflator: 1.1 (2020), 2.6 (2021), 4.2 (2022), 3.0 (2023), 2.4 (2024), 1.7 (2025).
  - Inflation (percent, period average): 6.2 (2021?), 5.6, 4.3, 2.1 (projection series).
  - Inflation (percent, end of period): -0.5, 4.6, 3.8, 2.0 (series across years).
  - Unemployment rate (percent): (value header present; specific series not printed in source text beyond 1.2 percent at 2023Q3).
  - Balance indicators (percent of GDP): Current account 15.5 (2020), 14.1 (2021), 17.3 (2022), 17.5 (2023), 17.6 (2024), 17.7 (2025), 17.8 (2026), 17.5? (series continues).
  - Exports of goods and services (percent of GDP): 63.7, 72.6, 80.9, 81.6, 81.9, 81.8, 82.0, 82.2 (series across years).
  - Imports of goods and services (percent of GDP): 59.7, 64.5, 72.2, 72.9, 72.8 (series continues).
  - Gross international reserves (millions of euros): 41.9, 138.1, 338.4 (series across years).
  - Revenue (general government, percent of GDP): 41.3, 37.9, 39.7, 38.8, 38.5, 39.4, 39.5, 39.6 (series through projection horizon).
  - Expenditure (general government, percent of GDP): 42.3, 39.0, 34.9, 36.1, 36.6, 36.8, 36.9, 37.0 (series).
  - Public debt (percent of GDP): 46.4, 48.6, 39.1, 36.4, 34.7, 33.4, 32.3, 31.3, 30.8 (series).
  - Credit to nonfinancial private sector (level, percent of GDP): 150.3, 135.2, 116.6, 102.7 (series).
  - Corporates (percent of GDP): 76.8, 68.8, 61.8, 56.2 (series).
  - Households (percent of GDP): 73.5, 66.4, 54.8, 46.5 (series).
  - Exchange rate (€/USD, period average): 0.88, 0.85, 0.95, 0.92 (series).
  - Nominal GDP (millions of euros): 2,531, 2,811, 3,210, 3,446, 3,613, 3,756, 3,880, 4,007, 4,137 (series 2020–2028).

### Risks, bottlenecks, and balance of risks
- Risks described as balanced but subject to substantial uncertainty and bottlenecks.
- Downside risks highlighted:
  - Slower than expected global growth.
  - More persistent inflation.
  - Tighter for longer monetary policy in the region.
  - Emerging fault lines and structural bottlenecks: housing affordability issues, labor shortages, climate change.
- Upside channels:
  - Greater than expected regional growth and lower inflation could increase tourist flows and investments.
  - Adoption of the EU Association Agreement could open up new markets over the medium-term.
- Buffers: solid macroeconomic buffers can mitigate downside risks should they materialize.

### Executive Board assessment and policy advice
- Commendations:
  - Resilience to external headwinds and sound macroeconomic management that enabled rebuilding of solid buffers.
  - Commitment to fiscal prudence, effective fiscal framework, and proactive debt management strategy that restored fiscal space and reduced debt.
  - Strength of the financial system; introduction of the lender of last resort facility.
- Policy recommendations and priorities emphasized by Directors:
  - Fiscal policy:
    - Maintain a tight fiscal stance to support disinflationary efforts and further strengthen buffers.
    - Channel available fiscal space toward higher infrastructure and affordable housing to tackle structural bottlenecks.
  - Structural reforms:
    - Advance structural reforms to promote economic diversification and lift medium‑term growth.
    - Pursue healthcare reform and build consensus to implement needed pension reforms given population aging.
    - Remove structural bottlenecks to boost growth and diversify the economy; leverage opportunities from the EU Association Agreement.
  - Financial sector:
    - Continue monitoring risks given large size of banks and their international exposure.
    - Further strengthen the resolution framework.
    - Ensure that the Andorran Financial Authority is autonomous and fully resourced.
  - Governance and institutional areas:
    - Continue efforts in governance, anticorruption and AML/CFT frameworks, and in closing data gaps, with IMF technical assistance.
    - Enhance digitalization and accelerate climate change adaptation efforts.
  - Implementation of EU Association Agreement:
    - Ensure smooth implementation once adopted.

### Selected social indicators (as presented)
- Population (2021): 79,535.
- Population at risk of poverty (percent, 2020): 13.
- Per capita income (2021, euros): 36,840.
- Human Development Index Rank (2021): 40 (out of 189).
- Gini Index (2020): 32.
- Life expectancy at birth (2021): 82.4.

*IMF Executive Board Concludes 2023 Article IV Consultation with the Principality of Andorra — Press Release No. PR 24/70 (March 6, 2024).*

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## References

- [Principality of Andorra and the IMF](https://www.imf.org/en/countries/and)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/03/06/pr-2470-andorra-imf-executive-board-concludes-2023-article-iv-consultation_