Page 9 - economic report 2021

among others. Moreover, the Chamber’s surveys showed an improvement in business activity
and increases in sales figures and investment.

In the case of financial, real estate, professional and technical activities, the recovery was quite
strong, with an estimated increase in GVA of 9.1%, after the 3.9% fall in 2020. Remember that this
is the most important branch of services in the economy, with almost 36% of total GVA.

In particular, the trend in the banking sector in 2021 was quite favourable, with 16.5% growth
in the aggregate profits of all the national entities. This increase was accompanied by notable
increases in both gross lending to clients and deposits. Altogether, this put the return on equity at
6.04%, more than the 5.46% in the previous year, while the default rate dropped.

As for the public sector, the improvement in the health sector in 2021 enabled growth in public
spending to be contained and favoured a recovery in tax revenue. As a result, the central
government reduced the budget deficit to 2.8% of GDP, after the serious deterioration seen in
2020 (-4.1%). On the other hand, the surplus of the Comú governments shrank more than one
point, to 0.5% of GDP. Altogether, this resulted in 3.5% GVA growth in the subsector Public
administration, education, health, social and personal services in 2021, contrasting with the
decline seen in 2020.

Looking towards 2022 as a whole, the prospects of economic growth remain positive. Effective
control of the pandemic, with high percentages of vaccinated population in Europe, and the
lifting of almost all restrictions on movement and social interaction, were decisive factors behind
economic recovery and the reactivation of tourism.

7
Accordingly, GDP data for the first quarter of 2022 show a very good performance by the
economy, with 17.3% growth year on year in real terms, according to the first published estimate,
still under review. This percentage represents faster growth when compared with the 12.1%
recorded in the fourth quarter of 2021.

Nevertheless, there is still a high level of uncertainty around the forecasts, largely due to the impact
of the armed conflict in Ukraine on the price of energy and other commodities. Internationally
strong inflationary pressures, rising interest rates and the energy crisis are causing a downward
shift in growth forecasts for European countries which, in turn, could lead to a slowdown in
economic growth in Andorra in the second half of 2022. Another factor that could limit Andorra’s
economic momentum are the major imbalances in the labour market, in the form of increasing
difficulties in finding qualified workers.

On the positive side, note that Spain is one of the European countries for which forecasts are
most positive for 2022, while France is also expected to continue growing, and this, as we know,
provides important support for the Andorran economy. Within this context, there is confidence
that the Andorran economy will give a good performance throughout 2022, led by the recovery
in tourism, and will exceed the expectations of the beginning of the year, so it could recover
pre-pandemic levels of activity. The official forecasts of the Department of Statistics published
in June are for real GDP growth of 5.2% in 2022, higher than in Spain and France, with a lower
average level of inflation than in the neighbouring economies.

Now that the pandemic crisis has been overcome, it is still essential to adopt economic policies
that support activity and minimise obstacles, in order to solvently tackle any challenges left by

Introduction