Fitch confirmed Luxembourg’s long-term foreign-currency issuer states at “AAA” with a stable outlook
Credit ratings agency Fitch confirmed Luxembourg’s long-term foreign-currency issuer rating at “AAA”, its highest, with a stable outlook but stressed potential issues in the event of a contraction of financial sector activity.
The firm warns, however, that a “severe sudden contraction of financial sector activity in Luxembourg with adverse consequences for the real economy that could negatively impact Luxembourg's labour market conditions and public finances.”
The rating was published on 13 April and also hangs on the assumption that “structural reforms to the pension system will be enacted over the medium to long term to offset the fiscal costs of Luxembourg's ageing population, which are currently projected to increasingly weigh on public finances over the long term.”
Among the key rating drivers, Fitch listed Luxembourg’s strong governance indicators, high growth potential, high per capital income and sound public finances “balanced against higher macroeconomic volatility than 'AAA' peers due to heavy reliance on the financial services sector.”