On Saturday 18 March 2023, Luxembourg's Ministry of Finance reported that the rating agency Moody's confirmed, after the markets closed on Friday, the "AAA" credit rating of the Grand Duchy of Luxembourg with a stable outlook: this better rating reflects Luxembourg's economic resilience, the good performance of public finances as well as the transparency and efficiency of government bodies.
Despite the deterioration of the global economic situation linked to current inflationary pressures, Moody's emphasised that the economic fabric of Luxembourg remains robust. The rating agency expects GDP growth of 1% in 2023. For 2024, the agency forecasts growth of 2%.
According to Moody's, the measures taken by the government within the framework of the tripartite meetings as well as the good performance of the labour market make it possible to mitigate the negative effects of the inflationary environment on businesses and households and to protect jobs in 2023.
Regarding the financial centre, which remains one of the fundamental engines of growth, Moody's highlights the diversification of the sector in the areas of investment funds, wealth management and insurance. The agency also highlights efforts to diversify the economy towards high value-added industries such as information and communication technologies (ICT), health industries and environmental technologies. According to Moody's, strong regulation of financial services and transparent and efficient institutions significantly reduce the likelihood and magnitude of potential financial and economic shocks.
Moody's emphasised the solidity of public finances despite the budgetary impact of the support measures decided. The rating agency expects Luxembourg to continue to respect the 30% of GDP threshold for public debt, set in the government programme. According to Moody's estimates, the level of public debt will increase from 26.3% in 2023 to 28.6% of GDP in 2024. At the same time, Moody's recalls that fiscal risks continue to exist, such as economic pressures and long-term budgets linked to the aging of the population.
Luxembourg's Finance Minister Yuriko Backes commented: “The maintenance of the AAA with a stable outlook underlines the solidity of our public finances and confirms the validity of the measures taken during the last tripartite. These support household purchasing power and mitigate the negative impact of the energy and inflationary crisis on businesses, without jeopardising our commitment to keep public debt at all times below 30% of GDP."