The ratings agency Standard & Poor’s (S&P) published Andorra´s rating on Friday night and gave it a BBB+/A-2 with a stable perspective. This is the best rating for the Principality since 2014, in other words, before the crisis of the BPA affair. In its last evaluation, in January 2022, the rating was BBB/A-2 with a positive perspective and, now, becomes a BBB+/A-2 with a stable perspective.
In their report, the assessors highlight that the improvement reflects an “economic and budgetary recovery by Andorra since mid-2021”. “The preliminary data from the first quarter of 2022 point to a strong increase in growth for the first half of the year, particularly in tourism”, they also point out and remark that the Principality “has registered a solid economic recovery”. In addition, S&P recalls the entry into the International Monetary Fund (IMF) in October 2020 as a contributing factor to the country´s economic resilience.
In this sense, S&P has increased its prevision of the real GDP going from 4,5% to 4,7%. A fact, they argue, based on the boost of economic activity thanks to “a strong winter tourism season” and to the construction sector. With regards to tourism, the agency signals the progressive improvement during this year with a flow of visitor arrivals that, they predict, should reach similar levels to the ones before the SARS-CoV-2 coronavirus pandemic. In fact, they consider that unemployment will return to pre-pandemic levels throughout 2023, recalling that the rate in Andorra “is still well below the Eurozone average”.
Regarding the debt percentage in terms of the GDP, the assessors state “the reduction of budgetary deficit and the economic recovery will place the relation public debt/GDP on a descending route”. All accompanied by an improvement in budget balance thanks to, among other things, “high growth in the first quarter of 2022”.
Standard & Poor’s points out that the advances made by the Government in the strategy for financial diversification have managed to increase sources of financing, helping to prolong the average maturity of debt. The agency also positively values the constitution of International reserves carried out by the Government.
To end, S&P in the report refers to the importance of reaching an association agreement with the European Union.