Page 55 - Economic report 2020

and investment, which easily exceeds the value The trade deficit reaches
of Andorran exports. In 2022, the trade deficit a historic high.
hit €1,405.6 million, 19% higher than in the
previous year. If we exclude the chapter of
works of art and antiques, this figure rises to €1,601.7 million. In both cases, the highest level of
trade deficit in the historical series was reached in 2022.

The described trend in trade flows led to an
Chart 7.3 to-GDP-ratio, the combined value of goods
TRADE OPENNESS (% of GDP) increase in the trade openness ratio (trade-

exports and imports expressed as a percentage
of GDP), as foreign trade flows increased more
than nominal GDP (+13.4%). In 2022, the
trade openness ratio reached 60.7% if works
of art and antiques are excluded (or 67.2% if
the total values are considered), a much higher
percentage than the 52.1% recorded in 2021.

Both imports and exports are still
greatly concentrated in a few sectors.
(*) Excluding the entry for works of art and antiques because it saw an
extraordinary increase in 2020 and 2022 which distorts the global result.

Source: Department of Tax and Frontiers and own preparation.
From the sectoral point of view, the degree of
concentration of Andorran imports remained
high in 2022. On the one hand, the five sectoral groups that are historically most significant in 53
imports (food products, transport material, mineral products, machinery and electrical equipment,
and products of the chemical industries) represent 62% of the total, demonstrating the high level of
concentration in imports. On the other hand, exports are traditionally concentrated in four sectors
(machinery and electrical equipment, transport material, textiles and optical, photographic and
precision apparatus), but in 2022, these only represented 32.9% of total exports because the sector
of works of art and antiques increased its percentage to 55%, which distorted the other groups.

Note that part of the Andorran imports are subsequently re-exported. In fact, looking at the top
ten import and export chapters, there are five matches: motor vehicles, perfumery, electrical
machinery and equipment, mechanical apparatus and articles of apparel and clothing accessories,
not knitted or crocheted. This overlap is considered to be indicative of so-called “intra-industry
trade” or “bidirectional trade” (one country is both exporter and importer of the same types
of product), in which the added value generated in the national economy or opportunism in
commercial trading become essential factors and assets.

Both exchange rate trends and changes in international trade regulations are major factors
influencing the re-exportation of products. In 2022, the euro depreciated, favouring Andorran
exports outside the Eurozone but also creating less favourable conditions for importing products
from countries outside the monetary union for subsequent re-exportation to the Eurozone.

As for regulation, Andorra is in the process of negotiating an association agreement with the Andorran economy: general developments | VII. Foreign sector
EU. These negotiations started in 2015 and are currently ongoing. The Government has already
announced its intention to hold a referendum for approval or refusal at the end of 2024. The
association agreement finalises a process of standardising and opening up the country’s economy
with the goal of accessing the single market and European programmes. The understanding will
include the adoption of a large part of the community acquis to enable balanced diversification
and development of the national economy.