Investing.com — S&P Global Ratings has affirmed the Principality of Andorra’s long- and short-term foreign and local currency sovereign credit ratings at ‘A-/A-2’ with a stable outlook.
The rating agency cited Andorra’s continued budgetary surpluses and low government debt, supported by a solid external position. These strengths are balanced against challenges including delayed economic benefits from the EU Association Agreement, limitations in data transparency, and constrained monetary flexibility without a central bank.
Andorra’s economy has been growing at nearly three times the euro area average, driven by tourism, construction, and private banking. Tourism has expanded beyond traditional winter skiing months, while financial services and construction have shown strong growth in 2025, with the latter supported by government policies to improve housing affordability.
S&P expects the EU association agreement, once approved, to converge financial regulations with European standards, support competitiveness, and boost tourism and retail by simplifying cross-border transactions. However, approval is being delayed as member states decide whether individual ratification is required.
The rating agency estimates Andorra’s banking sector holds external assets exceeding nonresident borrowing by just under $5 billion, or 112% of GDP. The current account surplus is projected to remain around 16% of GDP over 2025-2028, with net foreign currency reserves potentially exceeding €500 million by 2026.
S&P expects upcoming pension reform and solid tax collection to mitigate deterioration of social security accounts, offset increasing infrastructure spending, and support general government surpluses. Authorities plan to pass a reform by early 2026 to improve long-term sustainability of public finances.
The principality’s GDP growth is forecast to slow to 2.2% in 2025, following broader eurozone trends, though the impact will be less severe than in goods-producing economies more affected by U.S. tariffs. S&P projects annual average growth of 1.7% over 2026-2028, supported by tourism, ongoing real estate construction, and increased public investment.
Andorra’s government is focusing on economic diversification, affordable housing, infrastructure development, and digitalization. The 2026 budget includes €5 million for research and development, public housing, and key infrastructure projects.
The country’s general government debt-to-GDP ratio is expected to stabilize at about 30%, supported by consistent budgetary surpluses. S&P forecasts Andorra’s general government net asset position will remain solid, with net general government debt reaching negative 34% in 2028 from negative 31.5% in 2024.
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