Fitch and DBRS Morningstar reaffirmed Luxembourg debt was rated “AAA” with a “stable” outlook during their regular credit reviews, both issued on 6 March.

A stable outlook indicates the agencies do not anticipate lowering the scores within the next year or so. Higher credit grades typically lead to lower borrowing costs on the global financial markets.

In their reviews, both outfits pointed to Luxembourg’s strong public balance sheet and economic growth prospects.

However, Fitch said Luxembourg’s open economy “remains sensitive to global risks, like a eurozone recession, the recent spread of Covid-19 beyond China, disruptive Brexit, or protectionist measures of major global economies.”

DBRS Morningstar said “sustained turmoil in financial markets” could threaten the country’s financial sector, which plays a major role in the economy, but that Luxembourg’s banks and investment funds have sufficient liquidity to weather such storms.

Although housing prices gained 11% in the year to September 2019, “Fitch judges the risks from buoyant real estate price increases and strong credit growth to be limited.” DBRS Morningstar said recent moves by the CSSF, Luxembourg’s financial regulator, to increase the countercyclical capital buffer rate and recently tightened lending rules “could be used to contain household indebtedness”.

Pierre Gramegna, the DP finance minister, said in a statement on 7 March that the reiterated ratings showed the country’s economy was “solid” and “conducive to sustainable investment and smart and inclusive growth.”