IMF Executive Board Concludes 2010 Article IV Consultation with San Marino

Public Information Notice (PIN) No. 11/41
March 30, 2011

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case. The staff report (use the free Adobe Acrobat Reader to view this pdf file) for the 2010 Article IV Consultation with San Marino is also available.

On March 14, 2011 the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with San Marino.1


Following two years of economic contraction, led primarily by a sharp decline in fixed investment, the Sammarinese economy remains weak. There were signs of a moderate expansion in manufacturing and commercial activity during the first half of last year, but rising unemployment, stagnant wage growth, and lower confidence have all contributed to a fall in consumption. As a result, real GDP is estimated to have declined by about 1 percent in 2010. This year, the economy could build some momentum, but growth is projected to remain below 1 percent. The fiscal position weakened significantly in 2009-10, mainly due to a sizable decline in revenues, with the deficit rising from 3.4 percent of GDP in 2009 to an estimated 6.1 percent of GDP in 2010.

The financial sector is adjusting to the effects of Italy’s 2009-10 tax amnesty, which led to a significant outflow in bank deposits and, consequently, to a considerable decline in the size of banks’ balance-sheets. The system has shown resilience to the deposit outflow, but liquidity, profitability, and asset quality have deteriorated amid the economic slowdown. Progress has been made on meeting the 2009 Financial Sector Assessment Program (FSAP) recommendations, including strengthening financial regulation, eliminating certain bank-secrecy provisions, and tightening anti money-laundering defenses. Key challenges include the need to shore up the financial position of the largest bank and develop a sustainable new business model for the financial sector.

Executive Board Assessment

Executive Directors, while acknowledging recent steps to address long-standing policy concerns, encouraged the authorities to support medium-term economic prospects through a more effective pursuit of the unfinished reform agenda. In particular, restructuring the financial sector, strengthening economic and financial relations with Italy, and introducing a comprehensive fiscal framework will be key to a successful repositioning of the economy.

Directors noted that the financial sector weathered a period of heightened turbulence and deposit outflows relatively well, and commended the Central Bank of San Marino (CBSM) for its liquidity management. Looking ahead, they encouraged the monetary authorities to address remaining vulnerabilities, including shoring up the financial position of the largest bank, which remains a priority.

Directors recognized progress in response to the 2009 recommendations under the Financial Sector Assessment Program, but called for additional reforms to strengthen the financial system and improve its transparency. Measures taken to enhance the operational autonomy of the CBSM, buttress supervisory functions, and strengthen Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) defenses have been steps in the right direction. However, effective implementation is still lagging in a number of instances. For example, Directors urged the authorities to appoint as soon as possible a Head of Supervision, a position that has remained vacant for over one year.

Directors agreed on the importance of a new business model for San Marino’s financial sector, as the relaxation of bank secrecy and regulations better aligned with international standards undermine the viability of previous business practices. Accordingly, they welcomed strategic reviews underway and looked forward to their recommendations.

Directors welcomed the authorities’ goal to reduce the fiscal deficit, but counseled that the credibility of fiscal plans would be enhanced by a better-articulated consolidation strategy. Cuts in public sector employment through attrition and comprehensive tax reforms could be key elements of such a strategy. Directors also recommended a rapid enactment of the new pension laws to build on progress already made and to safeguard the sustainability of the pension system.

Directors noted the loss in competitiveness of the economy in recent years. In this regard, they considered that easing rigidities in labor markets, in particular impediments to the hiring of skilled non-resident workers, would be desirable.

Directors reiterated their concern about the inadequacy of national account and general government statistics, which hampers policy design and evaluation, and took note of the authorities’ request for technical assistance in this area.

San Marino: Selected Economic and Social Indicators, 2005-2011
  2005 2006 2007 2008 2009 2010 2011

Activity and Prices


Real GDP (change in percent)

2.4 3.8 3.5 -1.1 -13.0 -0.9 0.8

Unemployment rate (average; percent)

3.6 3.3 3.0 3.1 4.5 4.9

Inflation rate (average; percent)

1.7 2.1 2.5 4.1 2.4 2.1 1.9

Nominal GDP (million euros)

1,106 1,171 1,233 1,259 1,102 1,115 1,145

Public Finances (percent of GDP)


Overall balance

4.3 1.8 2.3 0.0 -3.4 -6.1 -4.6

Primary balance

4.5 2.0 2.6 0.3 -3.2 -6.0 -4.4

Gross debt

6.1 5.7 4.8 5.2 4.7 5.4 5.8

Money and Credit


Bank lending (change in percent) 1/

14.9 13.0 -9.1

Private credit (change in percent)2/

16.2 22.6 19.4 10.4 8.7 -12.5

Net foreign assets (percent of GDP) 2/

99.3 49.2 57.9 43.5 5.0 -12.3

Commercial banks

72.1 18.2 22.2 3.2 -43.2 -39.2

External Sector


Trade balance (percent of GDP) 3/

-3.7 -0.3 2.4 16.6 24.0 22.3

Exports (percent of GDP) 3/

184 197 202 223 214 166

Imports (percent of GDP) 3/

188 197 200 207 190 144

Foreign reserves (million U.S. dollars)

354 479 648 707 790 391

Number of tourists (millions)

2.11 2.14 2.16 2.11 2.06 1.98

Euros per U.S. dollar (average)

0.80 0.80 0.73 0.68 0.72 0.76

Social Indicators


GDP per capita (2009)


U.S. dollar


Ratio of GDP per capital of:






Population (November 2010)


Population density (November 2010)


per sq km


Life expectancy at birth, total (2006)


Literacy, adult (2008)


Sources: Sammarinese authorities; World Bank; and IMF staff estimates.

1/ As of October 2010.

2/ As of June 2010.

3/ Based on national account data.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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