Main characteristic features of the Andorran economy and recent economic development

PRICES AND COSTS
Andorran inflation has shown an evolution that is very much in line with the behaviour of consumer prices in the neighbouring economies, most especially Spain. Since Andorra first started to calculate the Consumer Price Index (CPI) in 1998, the average annual rate of inflation in Andorra has been 3%, a relatively moderate evolution and identical to that of Spain, but higher than that of the euro zone (2%) and that of France (1.6%) during the same period.

Inflation registered a slight acceleration of up to 3.2% in 2006, a higher increase than in the neighbouring economies. This can be partly explained by the effect of the application of new indirect taxes (ISI, IPI and IAC), which had an impact of almost 1% on inflation in 2006 according to Government estimates.

As far as labour costs are concerned, Andorra has no collective bargaining system for setting salary levels each year. However, within the relatively unregulated Andorran labour market, the establishment of a minimum wage for all segments of activity stands out. This rate is updated each year and kept in line with inflation. The minimum wage established for the year 2007 is 4.99 euros per hour (about 865 euros each month for a working day amounting to 40 hours per week).

The average salary for an Andorran worker has grown at an annual rate of 5% since 1998, and is currently situated at 1,722.96 euros per month. In terms of branches of activity, average salaries in manufacturing industry and construction are 5% and 7% higher respectively than the average salary for the whole of the economy, while the salaries for market services are, for the most part, between 4% and 22% lower than the average salary. Outside this range, the most interesting observations concern salaries in the financial sector, which are more than double the general average and salaries for activities linked to the public sector, such as the production of electric energy, gas and water –69% higher–, the Public Administration in the strict sense –22% higher– and health and education –between 11% and 7% higher–. At the other extreme we find primary activities, domestic work in the community and in households, which employ domestic staff with average salaries which are 27%, 40% and 41% lower than the general average, respectively.