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Economy

S&P affirms triple A rating for Lux



The triple A rating by S&P follows other AAA ratings by credit agencies such as DBRS Morningstar and Fitch. Alex Tihonovs/Shutterstock.

The triple A rating by S&P follows other AAA ratings by credit agencies such as DBRS Morningstar and Fitch. Alex Tihonovs/Shutterstock.

The rating agency Standard & Poor's (S&P) has confirmed Luxembourg's triple A rating, the highest on its rating scale, and depicting extremely strong capacity to meet financial commitments.

The triple A rating comes with a stable outlook for Luxembourg and follows previous rankings by other rating agencies such as the global credit rating agency DBRS Morningstar and American credit rating agency Fitch, which also accorded the grand duchy the highest rating in their latest assessments.

The outlook for the Luxembourg economy is also positive as the ratings agency S&P also expects the economy to rebound in 2021, growing by about 5.5%, with an average growth forecast of 3.2% for the period 2022-2024.

The reason for the triple A rating is substantiated by the Luxembourg government’s response to the pandemic, its prudent policy and the fiscal room for manoeuvre in recent years. “The government responded quickly and consistently to the socio-economic consequences of the pandemic, adopting a substantial stimulus package to support the economy and its citizens as soon as the health crisis broke out,” S&P said in its report.

Following the rating by DBRS Morningstar, it warned of the consequences of a “severe shock” to the country’s financial centre, that could result in a downgrade.

S&P in its report expressed confidence in the grand duchy’s ability to respond to external obstacles, stating that “Luxembourg is also well placed to deal with possible risks related to the external environment, including the possible impact of changes in international corporate taxation,” adding that the relatively low level of public debt allows the government to mitigate any such risks.  

Luxembourg’s finance minister Pierre Gramegna (DP) commented on the renewal of the 'AAA' rating by S&P, saying it “confirms once again the soundness of the government's fiscal policy and the effectiveness of the measures taken to deal with this pandemic. Despite a major impact on public finances, Luxembourg's debt ratio remains one of the lowest in Europe and I am pleased that the country remains attractive to businesses, investors and employees.”