Credit rating agency Moody’s has confirmed Luxembourg's "AAA" rating with a stable outlook.
On Saturday 31 August 2019, Moody's confirmed that the Grand Duchy will maintain its AAA credit rating - the highest possible rating. Among the key factors that justify maintaining the highest possible rating, Moody's has cited, in particular, sustained growth and a robust institutional framework, as well as a forward-looking economic policy and good fiscal performance.
In its analysis, the rating agency highlighted the strength of Luxembourg's economy and estimated that it will maintain a growth rate of close to 2.5% for the period 2019-2023. Despite a strong dependence of the economy on the financial sector, Moody's emphasised the strong sectoral and geographical diversification of the financial centre. It also noted the success of the government's efforts to promote the development of other economic sectors, such as Information and Communication Technologies (ICT) and the logistics sector.
Moody's pointed out another asset that strengthens Luxembourg's credit profile: the stable institutional framework of the Grand Duchy, which stands out in terms of government efficiency, the fight against corruption and respect for the rule of law. In this context, the rating agency focussed on credible and effective prudential supervision and regulatory framework, which contribute to maintaining the stability of the financial sector.
According to the credit rating agency, one of Luxembourg's main advantages remains the soundness of its fiscal performance, reflecting the government's prudent management of public finances. Luxembourg's fiscal position is thus among the strongest AAA-rated countries. Moody's also highlighted the low level of public debt and expected government surpluses to average about 1.3% of GDP by 2023. This will result in a continued decline in the public debt ratio, which should fall from 21.4% at the end of 2018 to less than 20% of GDP in 2020.
The rating agency concluded that the risks weighing on Luxembourg's credit profile, such as exposure to Brexit and changes in European and global tax regulations, remain very low, especially as the country has a resilient and dynamic economy. It also expected authorities to proactively address emerging issues.
Pierre Gramegna, Minister of Finance, commented: "In an uncertain international context, the continuation of the AAA is an important sign, reflecting the financial and economic stability of our country, and I am especially pleased to see that the policies pursued in recent years are confirmed, and that for Moody's, the country's economy is well positioned to face Brexit and the challenges ahead".
