San Marino entered the pandemic with substantial vulnerabilities and still struggling from the consequences of the Global Financial Crisis (GFC). However, the economy has shown significant resilience supported by a timely and targeted policy response. Fiscal support was substantially scaled up after external borrowing was secured, including through a debut Eurobond. The banking system was rationalized, partly capitalized, its liquidity substantially improved, and a strategy is being adopted to address exceptionally high nonperforming loans (NPLs). Some of these measures, while effective, have increased official public debt substantially.
1. San Marino entered the COVID-19 crisis with large vulnerabilities and struggling to find a new sustainable growth model. With GDP still 25 percent below pre-Global Financial Crisis (GFC) levels (despite a stable population), San Marino faced unresolved challenges in the banking system, weak external demand, and an unfinished structural reform agenda. The economy was still struggling to find a new growth model away from over reliance on the pre-GFC offshore banking model.
The authorities of the Republic of San Marino reiterate their appreciation for the candid and cooperative discussions held with Fund staff during the Article IV consultation and very much value their recommendations and tailored advice. The authorities broadly concur with the staff’s analysis and will continue to rely on the Fund’s recommendations to strengthen the ongoing recovery and safeguard financial stability and the soundness of public finances. They welcome the staff’s recognition that their policy efforts have managed to lower the country’s economic and financial vulnerabilities, despite the unprecedented adverse impact of the Covid-19 pandemic. On the back of a strong recovery underway, despite this year’s large increase, the public debt-to-GDP ratio is now projected to be on a declining path starting in 2022—a noticeable turnaround compared to the 2020 assessment of debt sustainability.
International Monetary Fund. Finance Dept., International Monetary Fund. Strategy, Policy, &, Review Department, and International Monetary Fund. Statistics Dept.
This paper provides background for a further round of discussions on the Fifteenth General Review of Quotas (hereafter 15th Review). The paper builds on work presented in previous staff papers and Directors’ views expressed in three meetings of the Committee of the Whole in September 2017 and February 2018. No proposals are presented at this stage, pending further Board guidance on possible approaches to narrowing the current differences of views.