Rating agencies S&P Global and DBRS Morningstar both confirmed Luxembourg’s AAA credit rating on Friday.
By awarding the highest possible rating to Luxembourg, S&P Global and DBRS Morningstar have once again certified the country’s sound financial health thanks to its balanced and far-sighted budgetary approach.
Finance Minister Yuriko Backes said the double confirmation of the “AAA” rating underlines the strength of the government’s economic and fiscal policy before and during the health crisis.
Luxembourg continues to remain attractive for companies and investors despite an uncertain international context. The government is therefore encouraged to pursue its economic policy aimed at sustainable growth for the country and its citizens.
Both agencies noted that Luxembourg has shown greater resilience to the shock of the COVID-19 pandemic than other countries. The government has effectively supported the country’s economy throughout the health crisis without jeopardizing the sustainability of public finances. This was made possible by the government’s forward-looking policy and fiscal space created in previous years.
Luxembourg’s economic stability is illustrated by a GDP contraction of only -1.8% in 2020, compared to an average of -6.5% in the euro zone. In 2021, Luxembourg’s growth rebounded strongly to reach 7%. For DBRS, the AAA rating also reflects the Grand Duchy’s robust institutional framework, a stable and predictable political environment and a strong and developed economy.
Finally, Luxembourg’s rating is based on the fact that the country is well placed to face potential risks related to the external environment, including the possible impact of changes in international corporate taxation.
Any temporary shocks in the financial sector can be cushioned by the diversity of activity within the market. More generally, maintaining a relatively low level of public debt represents a safety cushion to mitigate the materialization of any unforeseen events.