Page 7 - economic report 2021

Introduction

This year, 2022, the Chamber of Commerce, Industry and Services of Andorra presents the
twenty-seventh edition of the annual Economic Report of Andorra. This contribution to
understanding the economy of the Principality fulfils one of the Chamber’s legal duties, and would
not be possible without the loyal collaboration of Andorran businesses, who periodically answer
the situation surveys; the work of internal and external staff, who compile all the data provided
by the institutions and associations of this country and perform a detailed analysis, or the media,
who publish the content of this document.

Our report closely examines the most notable events in economic development in 2021, both
inside and outside Andorra, with a special section for each of the main sectors of the economy,
and offers an opinion on the economic prospects for 2022. Fortunately, we are able to write
this year’s introduction in a much more favourable context than one year ago, as the pandemic
is now almost over.

After a worldwide historic decline in economic activity in 2020, due to the impacts of the
COVID-19 pandemic, the process of recovery in the global economy in 2021 was also intense,
with 6.1% GDP growth, the highest figure in decades. This strong momentum has enabled the
world economy to recover and surpass pre-pandemic GDP levels. In 2021, many of the economic
policy measures that had been adopted by governments and economic institutions to tackle the
effects of the pandemic were still in place, and this contributed positively to the rapid recovery
in economic activity.
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However, the degree of recovery in GDP was uneven according to geographical area. In the
USA, for example, by the second quarter of 2021, the level of GDP of the fourth quarter of 2019
had already been restored. On the other hand, Eurozone GDP did not reach that level until the
fourth quarter of 2021. Equally, some European countries that had been deeply impacted by
the crisis due to high exposure to foreign tourism, such as the Spanish economy, will not recover
pre-pandemic levels of activity until 2022 or 2023. As a general rule, the countries that initially
suffered most from the impact of COVID-19 are also the ones that saw the strongest growth in
2021, something that also applies to Andorra.

In parallel, inflation rates rebounded notably in 2021, a factor that has become the main
preoccupation of international economic institutions in 2022 and a major risk of decline in global
economic growth over the next few months. The situation can mostly be explained by rising
energy prices, but rising prices in other commodities such as basic food and metals have also
contributed, and even a negative base effect, since it is compared with the fall in prices that
occurred in 2020 due to the economic slowdown at the start of the pandemic.

The Andorran economic context has clearly improved in 2021. The economic recovery took the
form of solid GDP growth in real terms, of 8.9% according to the advance figures published by
the Government, contrasting with the 11.2% downturn suffered in 2020. Real GDP at the end
of 2021 was therefore 3.2% lower than in 2019, before the pandemic. Andorra’s recovery was
stronger than in Spain, France or the whole of the EU, but note that the downturn in 2020 was
also more severe. In parallel, the Andorran population has continued to grow (1.9%), so that per
capita GDP in nominal terms increased to €35,399, equal to what it was in 2015-2017.

Introduction