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. As a result, smuggling is commonplace. 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 union 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, 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 Andorra must, to some degree, integrate into the European Union in order to continue to enjoy its prosperity. Although less than 2% of the land is arable, 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.
Economy - overview: Tourism, the mainstay of Andorra's tiny, well-to-do economy, accounts 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 (no tariffs) and as a non-EU member for agricultural products.
GDP: purchasing power parity - $1.2 billion (1996 est.)
GDP - real growth rate: NA%
GDP - per capita: purchasing power parity - $18,000 (1996 est.)
GDP - composition by sector:
agriculture:
NA%
industry:
NA%
services:
NA%
Population below poverty line: NA%
Household income or consumption by percentage share:
lowest 10%:
NA%
highest 10%:
NA%
Inflation rate (consumer prices): 1.62% (1998)
Labor force: 30,787 salaried employees (1998)
Labor force - by occupation: agriculture 1%, industry 21%, services 72%, other 6% (1998)
Unemployment rate: 0%
Budget:
revenues:
$385 million
expenditures:
$342 million, including capital expenditures of $NA (1997)
Industries: tourism (particularly skiing), cattle raising, timber, tobacco, banking
Industrial production growth rate: NA%
Electricity - production: 116 million kWh (1998)
Electricity - production by source:
fossil fuel:
NA%
hydro:
NA%
nuclear:
NA%
other:
NA%
Electricity - consumption: NA kWh (1998 est.)
Electricity - exports: NA kWh
Electricity - imports: NA kWh; note - imports electricity from Spain and France
Agriculture - products: small quantities of tobacco, rye, wheat, barley, oats, vegetables; sheep
Exports: $58 million (f.o.b., 1998)
Exports - commodities: tobacco products, furniture
Exports - partners: France 34%, Spain 58% (1998)
Imports: $1.077 billion (c.i.f., 1998)
Imports - commodities: consumer goods, food, electricity
Imports - partners: Spain 48%, France 35%, US 2.3% (1998)
Debt - external: $NA
Economic aid - recipient: none
Currency: 1 French franc (F) = 100 centimes; 1 peseta (Pta) = 100 centimos; the French and Spanish currencies are used
Exchange rates: euros per US$1 - 0.9867 (January 2000), 0.9386 (1999); French francs (F) per US$1 - 5.65 (January 1999), 5.8995 (1998), 5.8367 (1997), 5.1155 (1996), 4.9915 (1995); Spanish pesetas (Ptas) per US$1 - 143.39 (January 1999), 149.40 (1998), 146.41 (1997), 126.66 (1996), 124.69 (1995)
Fiscal year: calendar year
Reference
Much of the material in this article comes from the CIA World Factbook 2000 and the 2003 U.S. Department of State website.