Page 50 - economic report 2021

was favoured by the existence of long-term CONSUMER PRICE INDEX. DECEMBER 2021
contracts with foreign energy suppliers, which (base year 2018) Interannual variation rate (%) Chart 6.2
mitigated the impact from the energy shock that
is affecting the whole of Europe.

The most notable price rises were in the
components of transport (8.3%), due to energy
prices; clothing and footwear (5.6%) and hotels
and catering (3.3%). The other groups saw
smaller-than-average increases or declines. In
the latter case, the only components that saw
year-on-year price declines were leisure, events
and culture (-1.3%), for the fourth consecutive
year; alcoholic beverages and tobacco (-0.9%),
contrasting with 2020, when they were the
component in which prices rose most, and
health (-0.2%), where prices fell slightly for the
first time in nine years. Components Total

Source: Department of Stat st cs.
The analysis by special groups shows a strong
revival in oil product prices (31%), contrasting
with the strong decline seen in 2020 (-14.6%) Transport and clothing and footwear
and a result of the lifting of restrictions on led price rises in 2021.
movement and geopolitical tensions that have
pushed gas prices up. This factor led to a
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23.1% increase in the energy component, which was not offset through other channels, as fresh
products also saw a significant increase, specifically 5.4%. Only services showed a slower trend,
with a small increase of 0.5%. As a result, underlying inflation – which excludes energy and food
and measures the trend in core prices – ended the year with a year-on-year increase of 1.4%,
compared with 0.8% one year earlier. In comparison with neighbouring economies, underlying
inflation in Andorra in 2021 was lower than that of the Eurozone as a whole (2.7%), and also Spain
(2.2%) and France (1.9%), a positive factor for the competitiveness of the Andorran economy.

The progress of underlying inflation was more contained than that of overall inflation, unlike
in 2020, and demonstrates that price rises are influenced more by the overall situation than
The Andorran economy: general developments | VI. Prices and costs
structural factors, although over time, as seen in the first half of 2022, this could lead to wage
increases and second-round effects, with the risk of inflation becoming established at higher
levels. In 2022, this risk is one of the main concerns of the western governments and central
banks, which have already started to tighten monetary policies through interest rate increases.

2. Wages

In 2021, the trend in wages in Andorra was slower than in prices. Specifically, the average wage
in Andorra increased 1.8%, after two years of growing at a rate of 0.7%, to reach the figure of
€2,200, the highest in the available historical series (in nominal terms), according to the data from
the CASS (Andorran Social Security System) and the Department of Statistics.

This increase is lower than in general inflation (3.3%), unlike in 2020, when wages rose more. From
a longer historical perspective, it can be seen that average cumulative wage growth in Andorra in
the last decade (2011-2021) was 9%, higher than cumulative inflation in the same period (7.5%),
implying an improvement in purchasing power.