Yuriko Backes (DP), pictured in January, says that Fitch's confirmation of the AAA rating shows that the government's economic and budgetary policy continues to bear fruit. Photo: Romain Gamba/Maison Moderne

Yuriko Backes (DP), pictured in January, says that Fitch's confirmation of the AAA rating shows that the government's economic and budgetary policy continues to bear fruit. Photo: Romain Gamba/Maison Moderne

Credit rating agency Fitch confirmed Luxembourg’s AAA status, highlighting pandemic management and solid public finances as the main reasons for its decision.

resulted in Luxembourg retaining its AAA credit rating, Fitch also confirmed the grand duchy’s top status. The positive evaluation is the result of the country’s high per capita income, good management of the pandemic and solid public finances.

"The new confirmation of the AAA rating by an international rating agency shows that the government's economic and budgetary policy continues to bear fruit. Luxembourg remains attractive thanks to its political and economic stability and its capacity for continuous innovation,” said finance minister Yuriko Backes (DP).

Fitch’s decision was motivated by the government’s pandemic measures supporting the Luxembourg economy without damaging public finances. The government’s decision to gradually begin lifting coronavirus-related restrictions also played a part in the agency’s decision.

Luxembourg’s public debt ratio continues to be the lowest among AAA-rated countries. Fitch also projects that Luxembourg would be one of the first countries in the EU to achieve a balanced budget after recording a deficit of -3.5% of GDP in 2020. General government surpluses of +0.5% and +0.7% are expected in 2022 and 2023 respectively, according to Fitch. Meanwhile a GDP growth of 3.5% this year could be followed by 2.6% in 2023.

The possible risk of Luxembourg public finances deteriorating after the introduction of international corporate taxation was decided by the Organisation for Economic Co-operation and Development (OECD) and the G20 has been offset by a strong banking system. The positive financial situation of households in Luxembourg—recording one of the highest savings rates in the euro zone—has also contributed to the country’s positive assessment.