The banking sector, with its tax haven status, also contributes substantially to the economy. Agricultural production is limited—only 2% of the land is arable—and most food has to be imported. The principal livestock activity is domestic sheep raising. Manufacturing output consists mainly of cigarettes, cigars, and furniture.

Andorra is not a full member of the European Union, but enjoys a special relationship with it, such as being treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Andorra lacks a currency of its own and uses that of its two surrounding nations. Prior to 1999 these were the French franc and the Spanish peseta, which have since been replaced by a single currency, the euro. Unlike other small European states that use the euro, Andorra does not yet mint its own euro coins; in October 2004, negotiations between Andorra and the EU began on an agreement which would allow Andorra to mint its own coins. Andorra’s natural resources include hydropower, mineral water, timber, iron ore, and lead.