Depends...if its made of cotton, or at least 40% or more cotton, it'll shrink. If not, it won't at all.

If you stick it in the dryer, it will shrink to Smurfette size. If not (and you're not supposed to) it will spring back to the same size and shape after washing and air-drying. Merino is a very resilient fiber. That may be no help whatsoever.

Icebreaker tends to shrink a little bit but with the proper care it will keep its size- make sure you line dry it. Drying it in the dryer will shrink it a little but not to Smurfette size. Go with the medium unless you want it to fit tighter then keep the small.

Go with the small. My dress accidentally ended up in the dryer, and it didn't shrink much at all, certainly not by half a size. If you care for it properly and hang it up to dry, the small will be fine.