Fitch: “Here are the data on San Marino’s growth.”

From its last revision, Fitch Ratings says economic growth in San Marino is on the rise, moving up from 5 percent to 8.3 percent in 2021 and to 4.0 percent (from 3.0 percent) in 2022.

The key sectors were the export-oriented manufacturing and tourism.

ANIS’s reaction and proposals for the future

According to ANIS (ANIS – Associazione Nazionale Industria San Marino), although the past few years have marked an international crisis due in particular to the pandemic and Ukraine’s war, San Marino industries have shown their full strength and captured every possible opportunity for recovery. Following this trend, ANIS hopes for a speeding up of reforms in favour of greater international competitiveness. In particular, the focus is on lowering energy tariffs to push photovoltaics to optimal production capacity and on major actions in the water and waste sectors as well. The freedom to “work and develop,” to invest, to hire new staff, even renewing contracts, is what San Marino firms really need. In addition, proposals for contract renewal in the service sector should also be rediscussed.

The official Fitch Rating report

Fitch identifies structural strengths and financial vulnerabilities.

San Marino’s rating as “BB” comes from: high income levels, a resilient export sector and a large net external credit position, and a stable political system. Disadvantages include a high debt burden and poor asset quality in the large banking sector, very small size of the economy, limited administrative capacity reflected in data quality problems, and low growth potential.

Necessary and desirable actions include refinancing in 2024: San Marino will need to refinance its only Eurobonds (€340 million, equal to 21.6 percent of GDP) in 2024, due to limited liquidity reserves and poor internal bond market development. In addition, the retirement tax reform approved by the end of 2022 should help relieve fiscal pressures caused by an aging population, accompanied by a new income tax reform to be approved probably during the first half of 2023. Finally, the implementation of a more efficient VAT system is planned.

Energy-related forecasts, on the other hand, are optimistic: “Although the utility company’s loss is higher than previously expected, we estimate that it will be manageable at about 7.5 million euros (0.5 percent of GDP) in 2022, and our projections assume that the utility company will return to profitability this year.”

Reactions in policy framework

Secretary of State for Finance, Mr. Gatti, underlines that: ” the way forward is challenging but we are on the right track, so every small but important sign of recovery should be noted especially in the presence of an international context marked by uncertainty. I welcome this Fitch report as it will have a positive impact externally as well as a motivation to continue in the action taken in implementing the commitments contained in the government program.”

Mr. Righi, Secretary of State for Industry, says he is “satisfied that the policies and actions carried out by the Secretariat focused as always on both the internal and international sides with the aim of creating structured growth paths are bearing their important results.” In fact, export volume from 2019 to date has grown by more than 1 billion euros.

According to Mr. Pedini Amati, Secretary of State for Tourism, “the results obtained and certified by Fitch assume greater value when they are evaluated considering the difficulties that have undermined the tourism sector in recent years, the pandemic first and the Russian-Ukrainian conflict today, serious global events that limit the mobility of travelers and force entities and institutions to constantly review growth projects.”

On a different view, Future Republic, which warns not to claim victory because the rating has not yet reached the optimal level of AA due to few substantial changes from the previous government, complaining of a lack of actions to support investment. The perspective, therefore, does not seem so optimistic, but it should be read in a different key: “Fitch also reminded us of the inadequacy of the long-term retirement reform, while on tax issues we are still on hopes” and “also pointed out that the government has no intention to help families and businesses to cope with the high cost of living.”

Source: Fixing San Marino