On Friday 12 February 2021, the DBRS Morningstar (DBRS) rating agency reconfirmed Luxembourg's "AAA" with a stable trend; this is the highest possible rating, with "AAA" reflecting the country's good fiscal position, in comparative terms, as well as its independent and transparent institutions, the stable political environment and the strength of its economy.
In its analysis, DBRS noted that the fiscal room for manoeuvre in the Grand Duchy, available to the country thanks to the prudent policy of the government in recent years, will have made it possible to put in place very favourable measures to support businesses and employees from the start of the pandemic in 2020.
Despite the budgetary impact of the support measures as well as the contraction of the economy in 2020, the agency estimates that Luxembourg has the necessary capacity to absorb the shock due to the COVID-19 pandemic and to relaunch the economy. DBRS also estimated that the public debt ratio should remain below 30% of GDP.
DBRS has also incorporated environmental, social and governance (ESG) aspects in its analysis for the first time, attesting to a good rating in Luxembourg at all levels. At the environmental level, DBRS welcomed the country’s strong commitment to reducing greenhouse gases, as evidenced by the recent adoption of the climate law. Socially, the agency noted the high level of productivity, respect for human rights and widespread access to quality health care. Finally, in terms of governance, the country stands out for the independence of its institutions and its transparency, thus providing a framework conducive to investment.
Luxembourg's Minister of Finance, Pierre Gramegna, commented “By confirming the highest possible rating, DBRS once again underscores the merits of this government's fiscal and economic policy. This allows the country to better resist the economic consequences of the pandemic, while laying the groundwork for a sustainable and job-generating recovery. I am particularly pleased to see that the agency now takes into account the "ESG" aspects in its analysis, attesting in Luxembourg an excellent performance at all levels. An ambitious environmental policy, an efficient and high-quality social system as well as a governance framework that stands out for its transparency are indeed at the heart of Luxembourg's success."
