Page 50 - Economic report 2020

CONSUMER PRICE INDEX. DECEMBER 2022 France (+5.9%), but remained below that of
(base year 2021) Interannual variation rate (%) Chart 6.2 the Eurozone as a whole (+9.2% harmonised
inflation at the end of the year).

The most notable rises in prices were in
the components of food and non-alcoholic
beverages (+13.5%), where the effects of
the war in Ukraine were felt in some food
products, and leisure, spectacles and culture
(+9.1%), where prices were driven by the
dynamism in post-Covid demand. At the other
extreme is the remarkable stability of prices in
the component of communications.

The trend by special groups shows a strong
increase in the energy component (+28.5%),
and also in fresh produce (+12.5%) and other
Components Total foodstuffs (+14.2%), due to the impacts of the
Ukraine war on the supply of gas and specific
Source: Department of Statistics.
products such as cereals. In contrast, the prices
of services have only risen 2.8%, contributing to
Food and non-alcoholic drinks the fact that underlying inflation (which excludes
led the rise in prices. energy and foodstuffs and measures the trend
in core prices) ended the year with an increase
of 4.8%, much lower than general inflation, but
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also well above the rate of one year earlier (+1.4%). Compared with the neighbouring economies,
underlying inflation in Andorra in 2022 was lower than the harmonised rate for the whole of the
Eurozone (+6.9%), Spain (+7%) or France (+5.4%).

Equally, this is a very significant increase that has extended throughout the first few months
of 2023 and which, if not corrected within the next few months, could lead to further wage
increases and “second-round effects”, with the risk of entrenched inflation at high levels. This risk
3
is what led the European Central Bank to raise interest rates very quickly in 2022 and in the first
half of 2023. The effects of this radical turnaround in European monetary policy are already being
seen in inflation rates in Europe and also Andorra, where it fell to 4.4% in June 2023, although
underlying inflation still seems resistant, at a level of 6.3% in that month.
Andorran economy: general developments | VI. Prices and costs

2. Wages

The trend in wages in Andorra in 2022 was more moderate than in prices. Specifically, the
average wage increased 4.9%, compared with 1.8% in 2021, to more than €2,300, the highest
figure in the available historical series (in nominal terms) according to data from the CASS
(Andorran Social Security System) and the Department of Statistics. Now, this increase was
lower than in general inflation (+7.1%), for the second consecutive year, representing a loss
of purchasing power and motivating the approval in June of Law 17/2022, on measures to
improve citizens’ purchasing power, with the aim of mitigating the effects of major price rises
on the population.

3 Second-round effects occur when incomes are revised according to inflation, to try to avoid the loss of purchasing power, leading
to further inflationary pressures.