Fitch Ratings reaffirms the qualification of Andorra in BBB- despite the situation caused by the pandemic

Stable outlook

01/02/2021

In its note published last Friday, the rating agency Fitch Ratings reaffirms the qualification of Andorra in BBB+ and its stable outlook.

The agency also values positively the entry of the Principality to the International Monetary Fund (IMF) last October and highlights that the access to emergency financing from the IFM implies a safety net for the country and provides access to technical assistance in various aspects.

With regard to the financial sector, Fitch Ratings considers that, bearing in mind that liquidity positions are conservatively managed and that capital buffers are satisfactory over the regulatory threshold, the Andorran banking sector has an adequate headroom to withstand a possible deterioration in revenues and assets quality.

The agency also evidences the improved resilience of the banking sector and associated vulnerabilities of the sovereign balance sheet and highlights tangible improvements to the banking supervision framework and sufficient access to the financing facilities to mitigate the lack from a lender of last resort.

Also, in the ESG considerations, an ESG relevance score of 5 is highlighted for Rule of Law, Institutional and Regulatory Quality and Control of Corruption, and are a key rating driver.

With regard to the economic impact of the SARS-CoV-2 pandemic, Fitch Ratings points out that the increase in unemployment has been modest, despite the deep economic contraction and a limited increase in expenses despite the economic aid packages provided by the Government.

The agency also praises the task of diversification of the Andorran debt and positively values the internationalization policies, which allow the average maturity of the debt to be extended.

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Source: FitchRatings - Comunication deparment of the Andorran Government