Luxembourg has held on to its AAA credit rating according to the latest report from International credit rating agency, Standard & Poor's (S&P), which affirmed the Grand Duchy’s positive rating, while giving it a stable outlook, in line with ratings accorded by other agencies, including Fitch and Moody’s, as well as DBRS.
S&P emphasised the flourishing character of Luxembourg’s economy, institutional efficiency and the prudent fiscal policy pursued by the government. The agency expects an average GDP growth of 3.4% for the period 2017-2020. In particular, it expects a strengthening of household consumption following the implementation of the 2017 tax reform.
The report also highlighted the diversified nature of Luxembourg’s financial centre, which remains an engine of growth. In relation to risks, the evolution of international tax rules and banking regulations present potential problems, as well as the long-term financing of the pension system. As for the direct impact of Brexit on the Luxembourg economy, the agency believed that this will be limited.
S&P noted that the level of public investment in Luxembourg, including infrastructure, is among the highest in Europe, however the Grand Duchy’s stable outlook stems from the fact that it believes that Luxembourg will continue to maintain a budgetary balance, while adapting to changes in international corporate taxation. Thus, the level of public indebtedness would be stabilised at 22-23% of GDP.
Pierre Gramegna, Minister of Finance, was pleased with the result.
"I welcome this new confirmation of our 'AAA', which emphasises that the government's fiscal policy is paying off. The analysis also highlights the need to remain innovative and to adapt continuously to new challenges. Luxembourg has strong public finances, which reinforces its attractiveness and thus contributes to the creation of new jobs and the maintenance of an efficient social system,” he said.
Only twelve countries hold the AAA status from S&P. The others are Australia, Canada, Denmark, Germany, Hong Kong, Liechtenstein, the Netherlands, Norway, Singapore, Sweden and Switzerland.
