The Minister of Finance and Government Spokesperson, Eric Jover, and the State Secretary of International Financial Affairs, Marc Ballestà, gave a press conference on Friday on the preliminary conclusions issued by the International Monetary Funds´ technical personnel after their visit to Andorra over the last week. This preliminary report of Article IV –which will be followed by a final report that could be published before summer– is carried out periodically to all members of the IMF and, in order to complete it, a delegation from the organism held 32 meetings with officials from the General Administration, para-public companies, as well as from the private and financial sectors of Andorra.
Thus, with regards to economic perspectives, –in the note published yesterday– the International Monetary Fund points out that “the Andorran economy is recovering significantly from the profound recession originated by the pandemic”, highlighting “a superior positive growth than expected during the second half of 2021” translating to a real growth of 8,9% of the GDP despite the appearance of the Omicron variant. The preliminary report also emphasizes that the conditions of the job market “improved, with one of the lowest unemployment rates in Europe”. Furthermore, the document also states that general inflation, within a framework of high energy prices, was able to be contained “better than neighboring countries thanks to long term contracts with foreign energy suppliers”.
It is within this context that the IMF predicts that “the growth boost will maintain itself firmly throughout 2022, but down-trending risks will be predominant”. According to estimates, a growth projection of 4,5%, “activities should return to similar levels as the ones prior to the crisis in the second half of 2022”. In this sense, the organism refers to the war in Ukraine, the evolution of the pandemic and the rising prices of basic products and their impact on the European economy, all the while underlining Andorra´s resilience: “an important fiscal cushion, an ample surplus in the current account, recent accumulation of international reserves, well capitalized banks with liquidity, will provide help in an uncertain environment”.
In fiscal matters, the IMF´s technicians positively value “the available fiscal capacity” of Andorra, as well as “an active debt management strategy”. A fact thanks to which, they add, “the projection is that the debt ratio will drop rapidly to pre-pandemic levels after 2022, reaching the objective of the fiscal rule of around 40% of the GDP by 2024”.
Furthermore, the same text manifests that the Government has adopted financial policies in order to “guarantee resilience” through, among others, measures to accumulate international reserves. “The assigning, in 2021, of the special drawing rights by the IMF increased these reserves by 96 million euros arriving at approximately 5% of the GDP. In addition, authorities assigned 100 million euros of emitted debt in 2021 to international reserves.”
In terms of economic diversification, the importance of the Digital Transformation Program is recognized as “welcomed progress in this direction”. At the same time, the negotiations to reach an association agreement with the European Union are considered “to have the potential of unblocking considerable benefits for the Andorran economy”.
In summary, the preliminary conclusions point out that since Andorra joined the IMF in October 2020 the Andorran authorities have made “great strides”. As an example of this they remark that the authorities “have covered the lack of data and have perfected the anti-money laundering and financing of terrorism framework through an improved and regular control of cross-border flow”.
Text and photo: Govern d’Andorra