Andorra benefits from high per capita income, strong institutions, and improved financial supervision

Moody's has affirmed Andorra's sovereign credit rating at Baa1 with a positive outlook, citing the country's robust public finances, sustainable debt levels, and strong institutional framework as key strengths.

The agency emphasised Andorra's low public debt alongside significant public financial assets, which provide a substantial buffer against risks. It also highlighted the high per capita income, institutional quality, and recent advances in financial supervision. The report pointed to solid economic performance, with 3.9% GDP growth in 2025 and higher-than-expected public revenues stemming from broad economic momentum rather than tax hikes on individuals or companies. These elements have enabled public sector surpluses and continued reductions in debt relative to GDP.

Although Moody's expects growth to moderate in the years ahead, it regards the economic foundations as sound and the budgetary position as set to remain positive. The positive outlook hinges primarily on opportunities from the Association Agreement with the European Union, which could promote economic diversification, build resilience to external shocks, and further solidify institutions. Government officials noted that approval of the agreement could serve as a key trigger for a potential rating upgrade.

Moody's further praised forthcoming adjustments to the Eurosystem's repo mechanism for central banks, which will expand access to euro liquidity and ease banking sector risks, thereby enhancing Andorra's overall financial stability.

In a statement, the government welcomed the periodic review as confirmation of the country's capacity to uphold a strong fiscal stance amid economic uncertainty.