The international credit rating agency Fitch recently affirmed Luxembourg's credit rating at "AAA" (the best possible rating), with a stable outlook.
Fitch confirmed the "AAA" rating with a stable outlook on Friday 13 January 2023, after the closing of the markets. According to Luxembourg's Ministry of Finance, this rating reflects the Grand Duchy's good governance indicators, the good performance of public finances and the country's economic resilience despite the current uncertain context.
Following the economic slowdown in Europe, the agency forecast a drop in GDP growth in Luxembourg to 1.5% in 2023, compared to 2% in 2022. Fitch forecast that domestic demand would remain a key growth driver, albeit at a slower pace, and that increased public capital expenditure would support investment growth this year.
The agency also noted that inflation was continuing its downward trend and forecast inflation of 3.9% in 2023 and 2.4% in 2024. It also noted a slowdown in the evolution of property prices.
However, the analysis pointed to a number of risks for Luxembourg as an open economy, including weaker than expected growth in Europe and a possible (renewed) rise in energy prices.
In this context, the agency noted that Luxembourg's prudent budgetary policy remains one of the key factors in its assessment. With this in mind, Fitch expected that the level of public debt would remain at all times below the threshold of 30% of GDP.
Luxembourg's Minister of Finance, Yuriko Backes, commented: "Confirmation of the highest 'AAA' rating by Fitch is excellent news. This rating is an illustration of the resilience and performance of our economy, even in these times of polycrises. It bears witness to the soundness of the government's responsible budgetary policy and the measures taken to strengthen the purchasing power of households and to support businesses."
