The San Marino Secret: How Europe’s Oldest Republic Defies Economic Assumptions
Why manufacturing and trade, not tourism, power this high-income microstate.
While researching a recent critical thinking project, I looked into microstates and stumbled upon a statistic that left me speechless: San Marino’s economy isn’t based on tourism; it’s driven by other industries.
The main question for my project was: Why does a Microstate Like San Marino achieve a higher standard of living than many larger countries?
San Marino is one of the world’s oldest republics. Founded as a religious community in the 4th century, it has preserved its independence through diplomacy and robust institutions (Miller 1901). It is one of six microstates in Europe, and, despite its small size, boasts a high Gross Domestic Product (GDP) per capita and strong social indicators. This essay analyzes how historical stability and modern economic strategies explain its success.
Before examining the data, I assumed this microstate’s economy relied solely on tourism; however, San Marino’s economy is primarily based on wholesale and retail trade, as well as manufacturing. It is a high-income state with a high standard of living.
According to the International Monetary Fund (2025), manufacturing accounts for 34.2% of total Gross Value Added (GVA), followed by wholesale and retail trade (15.7%) and public administration (13.4%), while other sectors represent less than 10%. A notable difference compared with other small states, such as Andorra and Luxembourg, is that the Republic of San Marino has a much larger manufacturing sector (34% compared with just 4% in those countries).
The IMF report indicates that San Marino’s exports are well diversified by product, despite sectoral concentration. This supports and strengthens the manufacturing industry, a factor that, combined with trade openness and close cooperation with Italy and the European Union, drives productivity and income growth. Notably, these two sectors also generate the most employment in the country.
Its ancient religious roots, long-term political stability, and well-defined economic specialization have enabled San Marino to achieve a standard of living superior to that of many larger nations.
Therefore, based on IMF data and historical sources, I demonstrated and learned that my initial opinion, that a small-sized country always constitutes a disadvantage, was incorrect.
References
International Monetary Fund. European Dept. (2025). Republic of San Marino: Selected Issues (IMF Staff Country Report No. 2025/313). International Monetary Fund. https://www.elibrary.imf.org/view/journals/002/2025/313/article-A001-en.xml
Miller, W. (1901). The Republic of San Marino. The American Historical Review, 6(4), 633–649. JSTOR https://www.jstor.org/stable/1834173?seq=1
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