Andorra consolidates the economic recovery that began slowly at the beginning of 2014, increasing jobs at a rate of 3% per year.
The 1.5% rate for the fourth quarter of 2018, which was made public this week, puts unemployment in Andorra well below its European neighbors: Spain closed last year with an unemployment rate of 14.5% and France of 9.1%, and the European Union average of 7%. Thus, the Principality is once again a country with virtually no unemployment, after the last economic crisis brought out this reality for the first time.
Indeed, between April 2007 and December 2013, the Andorran economy accumulated almost seven consecutive years of destruction of jobs, losing employees, especially in the construction sector and public works. The slow recovery began in January 2014, and in the last two years, once the uncertainty generated by the crisis of the Private Banking of Andorra has been overcome, the economy of the Principality has increased the number of jobs at a rate of 3% annual.
In parallel to the recovery of traditional sectors of retail, tourism services, banking and construction, business services have grown strongly in recent years, and have become the third sector with more employees in the country Pyrenees , only surpassed by retail and hospitality. This new economic sector has grown with the opening of the economy to foreign investment, implemented from the end of 2012, and the signing of agreements to avoid double taxation that, until a few years ago, punished and made practically unviable the export of services from Andorra.
The Andorran economy grew last year for the sixth consecutive year, after the economic and financial crisis, and did so with an increase in nominal GDP of 2.5%, at a slightly lower rate than in 2016 and 2017, when it had grown in 2.6% and 2.7%, respectively.
Six years of budget balance
The Government of Andorra presented last week the liquidation of the 2018 budget, in which it achieved a management surplus for the sixth consecutive year, and a slight cash deficit equivalent to 0.08% of GDP. Since 2013, the Andorran executive has kept the red numbers at bay, making an effort to balance the accounts: in 2013, 2016 and 2017 he closed the budget with a surplus, and in 2014, 2015 and 2018 with deficits that oscillate between 0 , 08% and 0.5% of GDP.
The seven Comuns (municipalities) that form Andorra have followed the same budget balance line, and the country's global public debt has gone from 1,032 million euros in 2012 to 992 million euros in 2018. Seven years ago, the Global public debt (central government and Comuns) represented 41.9% of GDP; in December of last year, this percentage had already fallen by more than six points, standing at 35.8% of GDP. These debt figures also contrast with those of the two major neighbors of the Principality: in Spain, debt represents 97.2% of GDP, and in France, 99%.
The years of crisis and economic recovery have been years of reforms that have changed some of the pillars on which the growth of the Andorran economy had been based over the decades. In a decade, the Principality has gone from being an economy without direct taxes, with bank secrecy and practically closed to foreign investment, to deploy a new tax model with direct taxation of a maximum rate of 10%, fully cooperating in tax matters and in which foreign investment already represents 5.6% of GDP.
The entry of the Andorran economy into the new paradigm of openness, diversification and transparency should be consolidated in the coming years with the signing of an association agreement with the European Union, allowing the Principality to be part of the internal market without the need for be a member of the Union and preserving certain specific characteristics of a country with a small territorial dimension. The Government and the entire parliamentary arch of Andorra aspire to be able to conclude an agreement that grants the country a status similar to that of Liechtenstein, which since 1995 participates in the internal market within the framework of the European Economic Area.