Page 8 - economic report 2019

Andorra, on the other hand, has managed to distance itself from this general slowdown, with 1.8%
GDP growth in real terms in 2019, twice that of the previous year, according to the first estimate
published by the Government, still under review. The total nominal GDP in 2019 reached 2,817
million euros, the highest figure since 2007, although in real terms, the current GDP value is still
10% less than the maximum, also achieved in 2007.

So, growth in the Andorran economy in 2019 was lower but similar to that of Spain and higher than
France and the EU as a whole. In parallel, the Andorran population continued to grow significantly,
so per capita GDP in real terms increased very little, although this was after two years of decline.
In nominal terms, per capita GDP for Andorra reached 36,335 euros, the best level since 2011.

This trend was helped by a still favourable European and international context in 2019. The good
performance of the Andorran economy in 2019 was also reflected in the positive trend in many
indicators of activity and demand, although some of these already showed signs of exhausting an
upward cycle that, with the supply and demand shocks caused by the pandemic of Covid-19, finally
ended at the beginning of 2020. Specifically, growth was notable in the number of employees
and total employment, although this was lower than in 2018 and matched by an increase in
unemployment and numbers of job seekers. The rate also slowed in imports, industrial vehicle
registrations and Government operating costs and real investment. Moreover, declines were seen
in some important indicators, such as the number of tourists, energy consumption, car registrations
and imports of building materials, alerting to the threat of waning economic momentum.

The sectoral analysis shows that, as in 2018, the driving forces behind economic growth in 2019
were the services and construction sectors. Remember that services represent about 87% of
GVA, so their results are crucial to explaining the trend in the Andorran economy.
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In the case of the primary sector, real GVA shrank in 2019 for the second consecutive year, by 2%,
although its low percentage of the economy (0.6%) means that the impact on total GDP is hardly
noticeable. This decline was accompanied by a faster rate of fall in the numbers of employees
and utilised agricultural area. Moreover, the numbers of livestock decreased and the number
of establishments stagnated. As for the tobacco harvest, this year was unique as, due to the
situation caused by Covid-19 and the physical impossibility of exporting the tobacco, the whole
harvest from 2019 was destroyed and therefore no data have been recorded.

In contrast, construction was the most dynamic sector in 2019, with GVA growth of 8.6%,
although lower than in 2018 (13.8%). So, the sector has accumulated four years of expansion and
increased its share of total GVA to 7.3%, although it is still far from the maximum it represented
just before the crisis (13% in 2006). Other indicators of activity in the sector confirm the
dynamism in construction in 2019, such as increases in the square metres authorised for building,
public investment and job creation in the sector. Along the same line, the results of our surveys
corroborate the good performance in construction, with a fairly optimistic assessment of the
business situation and increases in sales, clearly above other sectors, and investment.

As for industry and manufacturing, the trend in 2019 was more favourable than one year earlier,
if we take into account the data for real GVA, which show an increase of 3.4%, higher than the
2% in 2018. The improvement in industrial and manufacturing activity resulted in an increase in
the numbers of employees and establishments in the sector. However, businesses’ replies to our
surveys do not portray such a favourable climate, as they reflect downturns in the confidence
indicator and opinions about business activity.

Introduction In relation to services, the trend in 2019 was positive overall, with growth in real GVA of 1.9%, six
tenths higher than in the previous year, and of 1.4% in the number of employees. A breakdown by