Republic of San Marino: Selected Issues

This Selected Issues paper evaluates the state of economic and export diversification in San Marino, a high-income small state with a manufacturing-heavy economy. Using sectoral Gross-Value-Added data and export diversification metrics—Herfindahl-Hirschman Index, Entropy Index, and Export Concentration Ratio—derived from mirror trade data, the study benchmarks San Marino against peer economies. While San Marino’s economy seems concentrated in manufacturing and wholesale trade at the aggregate sector level, more disaggregated product level data shows that its export structure is well diversified given the country’s size and development level, despite more recent trends suggest a slight decreasing in diversification. The analysis confirms a U-shaped relationship between diversification and income, indicating that high-income economies like San Marino may not further benefit from more diversification. These results suggest that horizontal structural policies—rather than sector-specific industrial policy—to supporting high-value-added products within currently competitive sectors, as well as to high-productivity growth sectors with economy-wide synergies, like information communication technology, are the most relevant to sustain productivity growth while maintaining resilience through diversification.