On Friday 14 September 2018, the Standard & Poor's (S&P) credit rating agency confirmed the continuation of the AAA rating for the Grand Duchy, with a stable outlook.
The agency forecasts annual economic growth for Luxembourg of around 3.3% on average for the period 2018 to 2021. This favourable outlook is mainly due to the expected increase in consumption, resulting from tax reform and wage indexation. According to S&P, Luxembourg is well positioned to cope with the pressures of the external environment in the years to come.
The agency also notes that public finances are healthy, thanks to the prudent fiscal policies pursued by the current government. In this context, the agency refers in particular to the challenge of VAT losses on eCommerce, which could be fully offset by the implementation of the "Zukunftspak" and the adaptation of certain VAT rates. Despite the evolution of international corporate taxation, S&P estimates that in the medium term Luxembourg will continue to post budget surpluses and that public debt will remain at a low level.
The agency has indicated that the Luxembourg economy benefits from an institutional framework conducive to economic policies promoting sustainable growth. The development of new niches within the financial sector as well as the government's economic diversification efforts contribute to the stability of the Luxembourg economy. In general, S&P has stressed in its report that the Luxembourg financial centre will continue to be a buoyant sector for the country. This trend should continue with the arrival of new activities in Luxembourg in the context of Brexit.
Finance Minister Pierre Gramegna commented "Once again, one of the most recognised rating agencies has confirmed the AAA for Luxembourg. Maintaining the highest rating is essential to ensure the attractiveness and competitiveness of the Grand Duchy. S&P's analysis confirms that the government has successfully completed its mission of fiscal consolidation and economic diversification, and I am pleased that these good results are internationally recognised. The next government can therefore continue to develop the country on a solid foundation".
