S&P, DBRS Confirm AAA Rating on Luxembourg

On Friday 5 February 2022, the rating agencies S&P Global and DBRS Morningstar (DBRS) each confirmed "AAA" credit rating of the Grand Duchy of Luxembourg; 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.

Finance Minister Yuriko Backes said: "The double confirmation of our 'AAA' rating underlines the soundness of the government's economic and budgetary policy before and during the health crisis. Luxembourg continues to remain attractive for companies and investors despite an uncertain international context. Also, the government is strengthened in the pursuit of its economic policy based on sustainable growth for the country and its citizens."

The two agencies note that the country has shown greater resilience than other countries in the face of the shock caused by the COVID-19 pandemic. The government has supported the country's economy effectively throughout the health crisis, without jeopardising the sustainability of public finances. This was made possible thanks to the far-sighted policy of the government and the budgetary room for maneuver created in previous years.

The resilience of the Luxembourg economy is illustrated by a GDP contraction limited to down 1.8% in 2020 against down 6.5% on average in the Euro zone. In 2021, growth in Luxembourg rebounded strongly to reach up 7%. For DBRS, the "AAA" rating also reflects the robust institutional framework of the Grand Duchy, a stable and predictable political environment as well as a strong and developed economy.

Luxembourg's rating is also based on the fact that the country is well placed to deal with any risks related to the external environment, including in particular the possible impact of changes in international corporate taxation. Any temporary shocks in the financial sector could be cushioned by the diversity of activities within the marketplace. More generally, the maintenance of a relatively low level of public debt represents a safety cushion making it possible to attenuate the materialisation of any unforeseen events.