Economy of Andorra


The economy of Andorra is a developed and free market economy driven by finance, retail, and tourism. The country's gross domestic product was US$3.66 billion in 2007. Attractive for shoppers from France and Spain as a free port, Andorra also has developed active summer and winter tourist resorts. With some 270 hotels and 400 restaurants, as well as many shops, the tourist trade employs a growing portion of the domestic labour force. An estimated 13 million tourists visit annually.
There is a fairly active trade in consumer goods, including imported manufactured items, which, because they are duty-free, are less expensive in Andorra than in neighboring countries. Andorra's duty-free status also has had a significant effect on the controversy concerning its relationship with the European Union. Its negotiations on duty-free status and relationship with the EU began in 1987, soon after Spain joined. An agreement that went into effect in July 1991 sets duty-free quotas and places limits on certain items - mainly milk products, tobacco products and alcoholic beverages. Andorra is permitted to maintain price differences from other EU countries, and visitors enjoy limited duty-free allowances.
The results of Andorra's elections thus far indicate that many support the government's reform initiatives and believe the country must, to some degree, integrate into the European Union in order to continue to enjoy its prosperity. Although arable land comprises less than 2% of the country, agriculture was the mainstay of the Andorran economy until the upsurge in tourism. Sheep raising has been the principal agricultural activity, but tobacco growing is lucrative. Most of Andorra's food is imported.
In addition to handicrafts, manufacturing includes cigars, cigarettes and furniture for domestic and export markets. A hydroelectric plant at Les Escaldes, with a capacity of 26.5 megawatts, provides 40% of Andorra's electricity; Spain provides the rest.

Overview

is the mainstay of Andorra's economy, accounting for roughly 80% of GDP. An estimated 9 million tourists visit annually, attracted by Andorra's duty-free status and by its summer and winter resorts. Andorra's comparative advantage has recently eroded as the economies of neighboring France and Spain have been opened up, providing broader availability of goods and lower tariffs. The banking sector, with its "tax haven" status, also contributes substantially to the economy. Agricultural production is limited by a scarcity of arable land, and most food has to be imported. The principal livestock activity is sheep raising. Manufacturing consists mainly of cigarettes, cigars and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods and as a non-EU member for agricultural products.

Agriculture

Because of Andorra’s mountainous character, only about 2% of the land is suitable for crops. However, until the tourism sector in Andorra experienced an upsurge, agriculture had been the mainstay of the economy. Hay, tobacco and vegetables must be irrigated; cereals, mainly rye and barley, are dry-cropped. Most of the cropped land is devoted to hay production for animal feed. Since there is insufficient sunlight on northward-facing slopes and the lands in shadow are too cold for most crops, some southward-facing fields high in the mountains must be used even though they are a considerable distance from the farmers’ homes.
Tobacco, the most distinctive Andorran crop, is grown on about 8% of Andorra's farmland. Andorran tobacco is usually mixed with eastern tobaccos, because of its strong quality. Other farm products include cereals, potatoes, and garden vegetables. Grapes are used mainly for raisins and for the making of anisette. The lack of modern methods on Andorra’s family farms is causing the agricultural sector to decrease in importance. Most food is now imported.

Animal husbandry

For many centuries, until eclipsed by tourism and other service industries, sheep raising was the basis of Andorra’s economy. Andorran mules are still greatly prized. Cattle, sheep and goats are raised both in the valleys and in some of the higher areas. Cattle are raised mainly for their meat, and there are few dairy cows. When the cattle move upward in the spring, entire families move to temporary villages in the mountains to herd, mow, and plant. Large droves of sheep and goats from France and Spain feed in Andorra in the summer, and the Spanish-owned animals in particular are looked after by Andorran shepherds. On their way back to their native land, many of the animals are sold at annual fairs; the Spanish fairs are usually held in Andorra in September and the French in November. Andorra’s own animal fairs are also held in the fall.
Livestock includes an estimated 9,000 sheep; 1,100 cattle; and 200 horses. Meat production has increased in recent years, but imports account for about 90% of total meat consumption. The milk produced is sufficient for domestic consumption, and so milk is exported to the EU, too.

Fishing

The streams are full of trout and other freshwater fish, but Andorra imports most fish for domestic consumption from Catalonia.

Forestry

About, or 22% of the total land area, is forested. Fuel wood may be freely gathered by anyone, but it may not be bought or sold. Wood needed for building purposes is cut in rotation from a different district each year. For centuries logs have been shipped to Spain. Most reforestation consists of pine trees.

Mining

For hundreds of years, Andorran forges were famous in northern Spain. There are still iron ore deposits in the valley of Ordino and in many of the mountain areas, but access to them is difficult. In addition to iron, small amounts of lead are still mined, and alum and building stones are extracted. The sulfurous waters of Les Escaldes are used in washing wool.

Statistics

GDP: purchasing power parity - US$3.66 billion
country comparison to the world: 168
GDP - real growth rate: 2%
country comparison to the world: 163
GDP - per capita: purchasing power parity - US$42,500
country comparison to the world: 15
GDP - composition by sector:
agriculture: N/A
industry: N/A
services: N/A
Population below poverty line: N/A
Household income or consumption by percentage share:
lowest 10%: N/A
highest 10%: N/A
Inflation rate :
3.9%
country comparison to the world: 59
Labor force: 42,230
country comparison to the world: 185
Labor force - by occupation:
agriculture 0.3%, industry 20.8%, services 79%
Unemployment rate: 2.9%
country comparison to the world: 1
Budget:
revenues: US$496.9 million
expenditures: US$496.8 million
Industries:
tourism, cattle raising, timber, banking, tobacco, furniture
Industrial production growth rate: N/A
Electricity - production: N/A
Electricity - production by source:
fossil fuel: 0%
hydro: 40%
nuclear: 0%
other: 60% imported from Spain
Electricity - consumption: N/A
Electricity - exports: N/A
Electricity - imports: N/A ; note - imports electricity from Spain and France; Andorra generates a small amount of hydropower
Agriculture - products: small quantities of rye, wheat, barley, oats, vegetables; sheep
Exports: US$117.1 million f.o.b.
country comparison to the world: 193
Exports - commodities: tobacco products, furniture
Exports - partners: France 17%, Spain 59.5%
Imports: US$1.789 billion
country comparison to the world: 154
Imports - commodities: consumer goods, food, electricity
Imports - partners: Spain 53.2%, France 21.1%
Debt - external: N/A
Economic aid - recipient: none
Currency: Euros have replaced the French franc and the Spanish peseta.
Exchange rates: euros per US dollar - 0.6827, 0.7306, 0.7964, 0.8041, 0.8054, 0.886, 1.0626, 1.1175, 0.9867, 0.9386
Fiscal year:
calendar year