San Marino IMF mission flags fiscal, banking reform priorities after 2026 review

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San Marino IMF reform priorities

Highlights

IMF projects San Marino's real GDP growth at 1.5 percent in 2025 and 1.3 percent in 2026, aided by domestic demand, manufacturing exports, and tourism.
San Marino's fiscal performance improves with a projected primary surplus of 3.8 percent of GDP in 2025 and public debt falling to 59.8 percent of GDP.
April 2026 €350 million five-year Eurobond issuance locks in a 3.6 percent coupon, extends maturities to 2031, and reduces reliance on domestic bank financing.

EU integration and near-term economic outlook

As reported by the International Monetary Fund, its staff said San Marino's economy remains resilient after meetings with the authorities from October 26 to November 5, 2026, while the newly signed EU Association Agreement creates what it called a historic opportunity to raise productivity, strengthen institutions and deepen integration with the European market.

The fund said implementation should be carefully sequenced to match economic priorities and the administrative capacity of the microstate. It highlighted regulatory alignment, adoption of the EU acquis, public administration modernization and measures to strengthen banking-system resilience as key reform areas.

Real GDP growth is estimated at 1.5 percent in 2025 and is projected at 1.3 percent in 2026, supported by domestic demand, manufacturing exports and tourism. The IMF said activity softens in the first months of the year, while fuel-price subsidy measures introduced in March and extended through November 30, 2026 help ease price pressures but also reduce fiscal space for other priority spending, including investment.

The outlook remains favorable, but the IMF said risks are tilted to the downside because of international uncertainty and domestic financial vulnerabilities. Growth is projected to slow to 1.0 percent in 2027 before returning to a medium-term potential of 1.3 percent, while inflation is expected to average 2.5 percent in 2026 and accelerate to 3.5 percent in 2027 as energy costs feed through and fiscal subsidies are phased out.

Debt management and banking system resilience

Fiscal performance continues to improve, with the primary surplus net of bank support reaching 3.8 percent of GDP in 2025 and public debt falling to 59.8 percent of GDP, according to the IMF's preliminary findings. The fund said maintaining a primary surplus of around 2.5 percent of GDP over the medium term would help cut debt further, rebuild fiscal space and protect the economy against external and financial-sector shocks.

The IMF also pointed to San Marino's April 2026 issuance of a 350 million euro five-year Eurobond as a major step in reducing financing risk. It said the sale was several times oversubscribed, locked in a coupon of about 3.6 percent, reduced reliance on domestic banks for budget financing and extended maturities to 2031.

The fund said further fiscal priorities include implementing a modern VAT, improving expenditure efficiency, scaling up well-selected public investment, reforming pensions to address ageing costs and fully budgeting the administrative burden tied to EU integration. It also backed continued digitalization and targeted public-sector hiring to support implementation without undermining medium-term sustainability.

On the banking side, the IMF said liquidity and asset quality improve, with non-performing loans declining and recoveries by the Asset Management Company exceeding expectations. Even so, it said vulnerabilities remain elevated because of uneven progress across banks, constrained capital and liquidity buffers in some institutions, and legacy assets that continue to weigh on profitability.

Policy priorities include stronger provisioning, insolvency-law modernization, closer alignment with international accounting rules, stronger capital plans and further work on operational efficiency. The IMF also welcomed the 2026 agreement giving the Central Bank of San Marino access to the ECB's EUREP repo facility through the Bank of Italy, as well as planned Basel III liquidity standards from 2027, as steps that should strengthen the financial safety net and support gradual convergence with EU banking rules.

Mario Draghi’s warning on the debt–inflation–growth trade-off highlighted how keeping interest rates above growth for too long can worsen debt dynamics and raise pressure for policies that tolerate higher inflation. We previously noted his argument that central banks should prioritize price stability while avoiding unnecessarily restrictive rate paths that could choke off productive investment and long-term productivity. He also pointed to EU market integration and targeted industrial-policy support, including funding to de-risk strategic investment, as complements to monetary policy in sustaining growth.

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