Fitch Ratings agency improves Andorra´s grade and for the first time rates the country at A- with a stable perspective

Fitch Ratings Agency published Andorra´s rating on Friday night and gave it a rating of A- with a stable perspective. It is the highest rating obtained by the Principality since Fitch Ratings began its evaluations in 2015. In the previous evaluation carried out, in January 2022, the grade given was BBB+ and, now, for the first time in Andorra´s history the grade obtained is an A- given by the agency.

In the report, the evaluators recognize the resilience of the country´s public finances in the face of the current global alterations and the strong economic recovery from the SARS-CoV-2 coronavirus pandemic. In fact, they foresee “another strong year of economic growth in 2022” with the recovery of the tourism sector and, “in order to reflect this”, they have revised their prevision of the real GDP for 2022 to 7,6%, up from the previous 5,2%.

Furthermore, the agency anticipates that in 2022 “the government´s fiscal balance will convert into surplus as the strong economic growth continues”. These fiscal results highlight “the government´s efficient management in times of economic tension”.

In terms of the debt percentage with regards to the GDP, Fitch Ratings points out a “great” improvement compared to their estimate at the beginning of the year, which was at 3,5% and currently sits at 1,1%. A number that the agency highlights as lower than the average of countries qualified as A-, and adding the anticipation of an overall progressive drop in debt.

In this sense, the agency also positively valued the constitution of international reserves carried out by the government so as to improve resilience against possible scenarios of strain. Their report states that overall the Andorran economy is a “solid” one despite its scale and point out that “the history of fiscal prudence is reflected in low government debt, giving ample margin to respond to recent external shocks”.

In terms of the current geopolitical context, Fitch Ratings indicates that the Andorran economy and government balance have maintained themselves “quite isolated” from the effects of the war in Ukraine. Specifically, the agency predicts possible lower inflation in Andorra when compared to the eurozone, thanks to, among other things, the energy supply contracts provided by FEDA. They complement “the great reserves held by the state´s energy company allowed the government to maintain energy prices stable throughout the winter”.

To end, the evaluators highlight Andorra´s task in obtaining statistical data that was lacking with the publishing of international investment statistics and payment balance. A fact which has aided in “re-enforcing out trust in the strength of Andorra´s exterior position”.

Text: Govern d’Andorra