Maroc - ITALICA.SM - A la Une - 14/Dec 14:30

IMF: 'San Marino's economic activity stabilizing at high levels'

[ Italica ] - Despite rising interest rates and regional slowdowns, San Marino's economy is nevertheless resilient, the International Monetary Fund reports in its concluding statement of the 2024 Article IV Consultation. Strong performance in the service sector has kept growth positive even if it has slowed due to a decline in foreign demand. At less than 1.3%, inflation is predicted to remain modest. As finance conditions improve and external demand stabilises, growth is expected to accelerate. San Marino's fiscal position is better than expected. Surplus tax revenues were conserved and spending was kept under control, but further fiscal consolidation is required due to the high public debt-to-GDP ratio. A value-added tax and a wider income tax base are two important fiscal reforms that should be taken into consideration. Other reforms include improving government spending efficiency and controlling the increase of public wages and pensions, as well as recalibrating pension benefits to address long-term demographic issues. Through write-offs and securitisation, banks have greatly decreased non-performing loans (NPLs), from 53% to 21%, and increased liquidity. The low profitability of the majority of banks in comparison to their regional peers, the high operational costs and restricted capitalisation of certain banks, the vulnerabilities posed by legacy non-performing loans, and the diminishing interest margins are obstacles that must be overcome. By implementing EU regulations and enhancing compliance, San Marino has advanced in the fight against money laundering and terrorism financing (AML/CFT). Updating beneficial ownership records and strengthening the Financial Intelligence Agency's resources require further efforts. Opportunities for economic growth and integration are offered by the EU association agreement. Sufficient funding and structural changes, such as more flexible labour markets and better real estate markets, will be necessary for successful implementation. To mitigate these risks and improve resilience, it is essential to implement structural reforms more quickly, manage debt effectively, and improve control of the financial sector. [December 14, 2024 - Italica]