The Andorran economy is recovering strongly from the pandemic, supported by a rebound in tourism, retail trade, construction, and professional services. Real GDP is expected to reach pre-crisis levels in the second half of 2022. While the unemployment rate is amongst the lowest in Europe and continues to decline, pockets of vulnerability remain. Notwithstanding significant policy buffers, there are still substantial downside risks, notably the impact in Europe of the war in Ukraine, higher than expected inflation, and a resurgence of infection rates.
On June 25, the Executive Board discussed a proposal for a historic US$650 billion general allocation of SDRs to address the long-term global need to supplement existing reserve assets. Following concurrence by the Executive Board on July 8, the Managing Director submitted the proposal to the Board of Governors on July 9 for its approval by August 2. If approved, which requires an 85 percent majority of the total voting power, the allocation would become effective by the end of August. The proposal makes a case for an allocation of US$650 billion (about SDR 456 billion), based on an assessment of IMF member countries’ long-term global reserve needs. It also includes measures to enhance the transparency and accountability in the reporting and use of SDRs while preserving the reserve asset characteristic of the SDR. The general allocation would help many EMDCs that are liquidity constrained smooth needed adjustment and avoid distortionary policies, while providing scope for spending on crisis response and vaccines.
On June 25, 2021, the Executive Board discussed a staff paper setting forth the considerations underlying the case for a general allocation of special drawing rights (SDRs) of an amount equivalent to US$650 billion (about SDR 456 billion) during the Eleventh Basic Period and the key features that could be included in the Managing Director’s proposal for this general allocation.
Andorra, the IMF’s newest member since October 2020, participated in its first Article IV consultation with a commitment to further enhance transparency. Tourism and banking-related services dominate economic activity in the euroized economy. The country enjoys long-standing political stability, a good track-record of fiscal discipline, a gender-balanced work force, and internationally competitive ski resorts. The authorities are managing the pandemic well with universal testing and expanded hospital capacity that kept fatality rates very low despite high case-loads. The testing strategy helped Andorra implement more targeted internal restrictions than in neighboring countries. At the same time, emergency fiscal measures stabilized real incomes and supported firms.
This paper discusses key findings of the assessment of Financial Sector Supervision and Regulation in Andorra. The assessment reveals that bank supervision in Andorra is broadly sound and has improved since the 2002 assessment. Institut Nacional Andorrà de Finances’ (INAF) new charter strengthened its independence and remedial powers. But these could be further strengthened by empowering it to impose all types of sanctions. Developing INAF’s onsite supervisory capacity and clarifying its requests to external auditors will be important for the bank and nonbank financial sectors.