IMF Executive Board Concludes 2012 Article IV Consultation with the Republic of San Marino

Public Information Notice (PIN) No. 12/46
May 8, 2012

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 2012 Article IV Consultation with San Marino is also available.

On April 27, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Republic of San Marino.1


After four years of GDP contraction, largely manifested in a sharp fall in exports and investment, the economy remains fragile, with recent activity indicators pointing to limited signs of recovery. Rising unemployment, stagnant wage growth, and lower confidence have all contributed to falling private consumption and low inflation. Real GDP is estimated to have declined by 2.6 percent in 2011. The recession is expected to linger this year, in line with output developments in Italy, which accounts for 90 percent of Sammarinese exports.

Financial sector balance sheets continued to compress on the back of steady outflows of deposits, while banks’ profitability and capital have weakened significantly, mainly due to rising nonperforming loans. The planned recapitalization of the largest bank, Cassa di Risparmio della Repubblica di San Marino (CRSM) remained elusive, but has gained traction in recent months. Further progress has been made on meeting the Financial Sector Assessment Program’s (FSAP) recommendations, including strengthening the supervisory functions and independence of the central bank and lowering barriers to international regulatory cooperation, as well as on broader transparency initiatives. The development of a sustainable business model for the financial sector remains a long-term challenge.

The fiscal position has weakened, mainly due to a sizeable decline in tax revenues. Tax receipts, in real terms, are estimated to have fallen by more than 15 percent over the past two years, largely due to the recession and lower revenues from the financial sector. The fiscal deficit is estimated to have widened from about 2 percent of GDP in 2010 to around 3 percent of GDP in 2011.

Executive Board Assessment

Executive Directors considered that growing uncertainty about the external environment and the future role of the Sammarinese financial sector weigh on the near-term outlook, raising the risk of a protracted recession and greater financial sector vulnerability. In this context, normalizing relations with Italy and pursuing the unfinished reform agenda would facilitate fundamental structural changes and strengthen medium-term prospects.

Directors noted the marked declines in financial sector liquidity, asset quality, and profitability. In particular, they urged a prompt recapitalization of the largest bank, with government involvement conditional on a new business model and the participation of existing shareholders. More broadly, Directors underlined that the financial sector needs to adapt to the changed domestic and international environment, including by searching for new areas of competitive advantage.

Directors acknowledged the continued progress made on the recommendations of the 2009 FSAP, particularly in strengthening the central bank’s supervisory functions and independence, but considered that more remains to be done. They also commended the steps taken on broader transparency initiatives and looked forward to early action to address remaining deficiencies in the regime to combat money laundering and the financing of terrorism.

Directors welcomed the measures taken to contain the 2012 budget deficit but called for a comprehensive medium-term consolidation plan, given growing fiscal risks. They agreed that permanent measures to increase the revenue base should be the focus of such a plan, with additional savings arising from further public administration reform. Directors also stressed the need for a deficit financing plan, which could involve issuing debt instruments on capital markets.

Directors underscored the importance of restoring competitiveness and developing a sustainable growth model. They agreed that structural impediments to growth need to be eased, including by promoting foreign investment and relaxing obstacles in hiring skilled nonresident workers.

Directors reiterated their concerns about shortcomings in economic statistics which hamper policy design and evaluation. In particular, they encouraged the authorities to produce balance of payments data and devote additional resources to meeting international standards for national accounts and government finance statistics.

San Marino: Selected Economic and Social Indicators, 2007–13
  2007 2008 2009 2010 2011 2012 2013

Activity and Prices


Real GDP (change in percent) 1/

3.5 -3.4 -12.8 -5.2 -2.6 -2.0 0.6

Employment (average; change in percent)

3.2 3.5 -0.3 -0.8 -2.2

Unemployment rate (average; percent)

3.0 3.1 4.5 4.9 5.5

Inflation rate (average; percent)

2.5 4.1 2.4 2.6 2.0

Nominal GDP (millions of euros) 1/

1,756 1,732 1,575 1,492 1,472 1,459 1,488

Output gap (percent)

3.2 -1.5 -4.4 -4.4 -4.4 -3.7 -4.1

Public Finances (percent of GDP) 2/


Overall balance

1.7 0.2 -2.3 -2.1 -2.9 -3.2 -3.4

Primary balance

1.8 0.4 -2.2 -2.0 -2.8 -3.0 -3.2

Structural primary balance

1.0 0.7 -1.1 -0.7 -1.6 -1.9 -2.0

Government debt

11.8 14.7 18.9 19.1 17.9 21.2 24.2


3.7 3.8 4.0 3.8 3.3 6.5 9.7

Net account payables

8.1 10.9 14.9 15.3 14.6 14.8 14.5

Government deposits

12.2 15.2 16.3 14.6 10.5 10.6 10.4

Money and Credit


Bank lending (average; change in percent)

14.9 13.0 -9.2 -11.4

Bank funding (average; change in percent)

6.0 -7.8 -30.6 -13.5

Net foreign assets (percent of GDP)

40.7 31.6 11.0 28.7 47.9

Commercial banks

15.6 2.3 -23.8 6.2 30.0

External accounts


Trade balance of goods (percent of GDP) 3/

23.2 24.5 24.4 27.9


214 227 208 196


191 203 183 168

Foreign reserves (millions of U.S. dollars)

648 707 790 613 342

Social Indicators






GDP per capita (2010)


U.S. dollars


Ratio of GDP per capital of:










Population (December 2011)




Life expectancy at birth, total (2006)


Literacy, adult (2008)


Sources: IMF, International Financial Statistics; Sammarinese authorities; World Bank; and IMF staff calculations, estimates and projections.

1/ Based on new preliminary expenditure-based national accounts statistics as part of technical assistance by STA, with the revision for 2005–10 expected to be completed by mid-2012.

2/ For the budgetary central government.

3/ Based on national accounts statistics; including goods and services.

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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