Public debt has fallen below 60% of GDP, state finances are improving and the economy continues to grow, albeit at a modest pace. The International Monetary Fund has praised the results achieved by San Marino, while warning that the work is not yet done. Problems remain in the banking system, further pension reforms will be needed, and the government will have to maintain prudent management of public spending. In the background looms the association agreement with the European Union, seen as a historic opportunity for San Marino’s economy.
This is the picture that emerges from the mission of the International Monetary Fund (IMF), which met with authorities on Mount Titano from 26 October to 5 November 2026. At the end of the visit, mission chief Trevor Lessard presented preliminary assessments of economic performance, public finances and the reforms to be tackled in the coming years.
The assessment of the budget results is particularly positive. According to the Fund’s experts, San Marino has managed to maintain solid economic resilience despite international headwinds, helped by the diversification of productive activities and a fiscal policy that has allowed for a gradual reduction of debt.
The most significant achievement concerns public finances. In 2025, debt fell to 59.8% of GDP, while the primary surplus — calculated excluding support for the banking sector — reached 3.8% of GDP. This marks the fourth consecutive year closing with a primary surplus, meaning revenues exceeded expenditure net of interest payments on debt.
For the Fund, this is an important milestone that has helped strengthen investor confidence.
The recommendation, however, is not to change course: in the medium term, San Marino should maintain a primary surplus of around 2.5% of GDP, in order to continue reducing debt and set aside resources to draw on in the event of new economic crises or financial system difficulties.
Economic growth slowing: 1% expected in 2027
San Marino’s economy closed 2025 with estimated real growth of 1.5%, supported by domestic consumption, manufacturing exports and tourism. For 2026, the Fund forecasts GDP growth of 1.3%, despite the slowdown recorded in the first months of the year.
Prospects for 2027 are less favorable. Growth is expected to slow to 1%, before gradually returning to around 1.3% in subsequent years. The main drags will be international uncertainty, rising prices and less favorable financial conditions.
Inflation prospects are also a concern. After averaging 1.6% at the end of June 2026, the Fund forecasts an acceleration to 2.5% for the whole of 2026 and 3.5% in 2027. Rising energy costs and the gradual phasing out of broad fuel subsidies could put further pressure on prices.
The measures introduced to tackle rising fuel costs are themselves under the experts’ scrutiny. The steps introduced in March and extended until 30 November helped contain price increases and support domestic demand. At the same time, however, they increased public spending, reducing resources available for other measures, starting with investment.
On the labour front, unemployment remains at record lows, while employment growth has slowed after the strong post-pandemic rebound. Cross-border workers continue to play a vital role for San Marino businesses, helping offset the limited availability of local labour.
€350 million Eurobond: Fund gives the operation its seal of approval
Another favorable assessment concerns the April 2026 Eurobond issuance. San Marino placed €350 million in five-year bonds, securing demand well above supply and a coupon of around 3.6%, lower than that of the previous issue.
The operation allowed the country to raise in advance the resources needed to meet the bond’s maturity due in January 2027. This reduced the risk of having to refinance debt under tight time constraints and extended maturities out to 2031.
According to the IMF, the success of the issuance demonstrates San Marino’s improved financial credibility. It also allowed the state to reduce its reliance on domestic banks to finance the public budget.
The path forward, the Fund suggests, is to further diversify funding sources, better spread out maturities and improve debt management, making the most of the new regulatory framework.
EU agreement: a historic opportunity, but more resources and staff are needed
A central part of the assessment concerns the association agreement with the European Union, signed on 19 October 2026. For the Fund, it represents a concrete opportunity to boost productivity, strengthen institutions and foster the integration of San Marino’s economy into the single market.
The transition, however, will require significant effort. San Marino will need to align its regulations with those of the EU, modernize public administration and prepare the financial sector for the new rules, all while taking into account the country’s size and the capacity of public offices to manage numerous changes simultaneously.
The experts therefore suggest a precise roadmap, with clearly defined responsibilities, realistic timeframes and an assessment of the financial and human resources required. Implementation should be gradual, giving different sectors time to prepare.
The Fund also believes it may be possible to speed up parliamentary approval of much of the EU legislation, in order to concentrate administrative effort on the more complex issues.
Supporting the European path will also require targeted hiring within the public administration, particularly of staff with technical and specialist skills. However, the IMF warns against a blanket increase in staffing levels, which would push up current spending and reduce resources available for investment.
Taxation: Fund calls for completion of VAT reform
Among the priorities identified by the experts is the completion of a modern value-added tax system, in line with EU rules and international best practices.
The new system should be simple, with few exemptions, and should limit differentiated treatments, reducing both the costs of transitioning from the current system and the scope for tax avoidance.
The Fund also gives a positive assessment of the income tax reform implemented in 2026, crediting it with broadening the tax base, strengthening compliance and making the tax system more progressive.
To preserve these gains, however, it will not be enough to act on revenues alone. Better oversight of how public resources are spent will also be necessary.
The experts recommend a careful review of subsidies, transfers, tax breaks and off-budget funds, identifying the least effective expenditures and directing more resources toward measures capable of generating economic and social benefits.
Increases in public sector wages will also need to remain compatible with medium-term fiscal sustainability, without undermining the ability to hire the professional skills needed.
Pensions: a new intervention on retirement age and benefits is possible
One of the more delicate warnings concerns the pension system. The progressive ageing of the population risks increasing pension spending and putting pressure on fund reserves.
For this reason, the IMF believes that, following the previous reform, a further intervention on pension system parameters could be necessary, based on updated data and long-term projections.
Among the options mentioned are changes to the retirement age, penalties for early retirement, and revisions to the criteria used to calculate benefits.
These are not decisions that have already been made, but options the Fund suggests should be evaluated to prevent the gradual depletion of pension reserves, while still ensuring adequate pensions.
More investment needed in healthcare, infrastructure and energy
The improvement in public finances, according to the experts, should allow San Marino to devote more resources to investment. Among the priority sectors identified are healthcare infrastructure, the modernization of public services and energy security.
The Fund specifically suggests boosting solar energy production and considering battery storage systems, in order to make the country less exposed to fluctuations in energy prices.
Investments, however, will need to be selected using transparent criteria, backed by reliable cost estimates and consistent with the reduction of public debt.
Another necessary step concerns the digitalization of public administration. Expanding online services, modernizing procedures and aligning regulations with European standards could improve office efficiency and reduce the burden on citizens and businesses.
Banks: situation improved, but non-performing loans and capital issues remain
The banking sector is where the Fund maintains the greatest caution. Overall indicators have improved, liquidity has increased, and institutions have continued to reduce non-performing loans. However, the clean-up of the system is not yet complete.
Progress has not been uniform across all banks. Some institutions continue to show limited capital and liquidity buffers, while problem loans remain high. Balance sheets are also weighed down by properties acquired through recovery procedures and financial instruments that are difficult to sell.
In 2026, bank profitability was also affected by less favorable conditions on international financial markets.
A positive assessment, however, concerns the recoveries achieved by the Asset Management Company (AMC), which exceeded expectations and allowed for the full repayment of the state-guaranteed senior tranche.
Risks remain, however, linked to the significant mezzanine and junior exposures still present on banks’ balance sheets. These are instruments with higher risk levels, whose recovery depends on the performance of the underlying assets.
The Fund therefore calls for continued reduction of non-performing loans, strengthening of institutions’ capital base and improved asset quality.
Among the suggested measures is also the modernization of insolvency legislation, which dates back around a century, in order to make debt recovery and the management of problem exposures more efficient.
Banks should also move closer to international accounting standards, including IFRS 9, to improve balance sheet transparency and the valuation of financial assets.
New investors in banks: IMF calls for rigorous controls
Particular attention is given to San Marino institutions currently seeking new capital and new investors.
According to the Fund, issues relating to capitalization and ownership structures must find stable, lasting solutions, preventing difficulties from dragging on over time.
Any recapitalization needs should be addressed primarily through private solutions. At the same time, supervisory authorities must rigorously verify the reliability and professionalism of potential new owners.
A willingness to invest money will not be enough on its own. New investors will also need to present credible business plans, capable of demonstrating how institutions can be returned to sustainable profitability.
The Fund also urges banks to cut operating costs, rationalize their branch networks and sell off remaining properties on their balance sheets, in order to improve efficiency and financial results.
The project for collaboration between institutions on IT infrastructure is viewed favorably, as it could reduce costs and facilitate integration into the European financial system. The experts suggest extending this cooperation to cybersecurity as well.
Bank liquidity: ECB agreement viewed positively
Another achievement recognized by the IMF concerns the 2026 agreement granting the Central Bank of San Marino permanent access to the European Central Bank’s EUREP facility, via the Bank of Italy.
The mechanism represents a significant strengthening of liquidity support tools, offering San Marino’s central bank an additional means of obtaining financing in case of need.
The Fund also welcomes the roadmap set for 2027 to gradually introduce Basel III international liquidity standards, through the LCR and NSFR indicators.
Further steps will also be needed to improve the management of banking crises, strengthening recovery and resolution plans and progressively aligning San Marino’s regulations with those of the EU.
European banking integration: gradual transition and new skills
The association agreement with the European Union will bring significant changes to the financial system as well. Banks will need to progressively adapt to European rules on capital, supervision, risk management and transparency.
The IMF recommends proceeding in stages, starting with the areas that are already better prepared and taking into account the operational capacity of institutions.
Alignment with European anti-money laundering and counter-terrorism financing rules should also continue in parallel. The experts also view positively the strengthening of cooperation between San Marino authorities and European supervisory bodies.
Managing this process will require investment in IT systems and highly specialized staff, both within banks and supervisory bodies. The Fund therefore believes it would be appropriate to allow greater flexibility in personnel policies, in order to attract and retain the necessary expertise.
Economic statistics: a more independent, better-equipped office is needed
The final issue addressed by the mission concerns the quality of economic data. According to the IMF, San Marino needs to improve the timeliness and completeness of information on national accounts, external economic relations and the financial sector.
Having more up-to-date statistics would allow for a better assessment of economic trends, the identification of potential risks and more effective public policy decisions.
The Fund therefore reiterates its recommendation for the creation of a professional, independent statistical body, equipped with adequate staff and resources, along with IT systems capable of collecting, storing and disseminating economic and social data.
The plans of San Marino’s authorities to strengthen the staffing, resources and autonomy of the Statistics Office are welcomed, seen as necessary steps also in light of closer integration with the European Union.
