Page 49 - economic report 2021

For its part, the IMF is more cautious and predicts 4.5% economic growth in Andorra in 2022,
which would enable it to recover the pre-crisis level during the second half of 2022. Equally,
the institution states that the downward risks in these forecasts are significant and are related
to the economic impact on Europe of the war in Ukraine, the marked rise in commodity prices,
an unfavourable trend in the pandemic, weaker recoveries than expected in the neighbouring
economies and more restrictive financial conditions. The IMF highlights as positive factors to
tackle these risks, the fiscal margin still held by the government, the current account surplus, the
accumulated foreign reserves and a banking system with good levels of liquidity and capitalisation.

In the mid-term, the IMF predicts that growth will converge towards its potential of 1.5%, while in
relation to prices, it considers that inflationary pressures will persist in 2022 and early 2023 due to
high energy prices, as in the neighbouring economies, and that the pressures will then gradually ease.

VI. Prices and costs

1. Consumer prices

2021 saw an international turning point in the behaviour of inflation, with a knock-on effect on
inflation in the Principality. After ending 2020 in negative figures (-0.5%), prices in the Andorran
economy saw a sustained upward trend throughout 2021, with progressive acceleration in growth
rates, ending the year with a 3.3% year on year change, the highest since 2007. The main cause 47
of this growing inflationary pressure is rising energy prices, but there was also a contribution from
rising commodity prices, of both basic foodstuffs and metals, as well as the unfavourable base
effect on comparison with the fall in prices in
2020, due to the Covid-19 pandemic. There was a turning point in the
trend in inf at on, which saw the
Compared internationally, the trend in prices
in Andorra was much more contained than in highest rate since 2007.
Spain (6.6%), where most consumer goods come
from, and also remained below price increase in France and the Eurozone as a whole (3.4% and 5%
harmonised inflation at the end of the year, respectively). The more contained price trend in Andorra

Chart 6.1
ANDORRAN CONSUMER PRICE INDEX - Interannual variation rate (%)

General index Underlying index The Andorran economy: general developments | VI. Prices and costs
Source: Department of Stat st cs.