Andorra: Country and Foreign Investment
Economy and Currency
This page was last updated on 30 Jan 2019.
With only a tiny proportion of arable land - about 5% of its total area - Andorra's agriculture was historically based on raising livestock, especially sheep, pigs and cattle. In modern times, animal farming is still important, along with tobacco production. However, tourism has come to dominate the economy, accounting for no less than 80% of GDP. The main tourist magnet is the absence of duties or VAT, although Andorra's relative advantage over France and Spain has diminished as these countries have begun to liberalise their markets.
Andorra is prosperous, with minimal government and taxation. However, in July 2013, the Government provided clarification on a bill intended to introduce an income tax. Its per capita GDP was estimated at US$39,150 in 2017, which is one of the highest in the world.
The financial services sector represents about 15% of the economy, though tourism is by far Andorra's biggest earner, accounting for more than 80% of GDP. Most goods have to be imported, and there is a structural trade deficit. Government finances are healthy, with a primary surplus most of the time, and a small amount of national indebtedness.
Growth rates have been volatile, as Andorra's economy tends to be heavily influenced by its neighbours. The economy suffered from the global economic downturn experienced by Spain and France and the resulting stagnation of tourist numbers from those countries. Nevertheless, there has been a slow recovery in recent years, leading to a modest growth rate.
In December 2012, ratings agency Standard & Poor's lowered its long-term sovereign credit rating on Andorra from A/A-1 in 2011 to A-/A-2. Since then the rating has declined more, but it is now stable at BBB.
Andorra is a member of the EU customs union; it is treated as an EU member for trade in manufactured goods and as a non-EU member for agricultural products. Therefore it applies the common external tariff of the EU for non-agricultural goods.
Previously, Andorra had no official currency and a wide range of currencies were accepted internally. On 30 June 2011, Andorra officially adopted the euro as its official currency.