Republic of San Marino

San Marino has successfully diversified its economic structure: the previously oversized banking sector deleveraged following the banking crisis, while manufacturing and nonfinancial services exports expanded, supported by moderate unit labor costs and strong corporate balance sheets. Prudent fiscal policy has helped rebuild buffers and, together with important progress in financial sector reforms, reduced legacy vulnerabilities. However, public debt remains high and significant challenges persist in the banking sector. As a euroized small open economy vulnerable to external shocks, San Marino requires larger policy buffers.