One week after S&P, the Canadian rating agency DBRSconfirms the AAA rating of Luxembourg, the trend remaining stable.
DBRS highlights in particular the country's solid institutions and the positive evolution of Luxembourg's economy, with a growth forecast close to 4.0% in 2017 and 2018. The agency also emphasised that the income per capita, in purchasing power parity, is 2.3 times higher than the Euro area average. Concering public finances, DBRS expects a balanced budget to be maintained and that the medium term budget objectives will be met, even after the implementation of the tax reform which is likely to increase the domestic demand.
Among the risks, which DBRS qualifies as 'manageable', the agency particularly stresses the limited degree of economic diversification, with the financial sector as the main cause, the vulnerability of the economy to external shocks and the unpredictable future of international taxation. Like other rating agencies, DBRS outlines the challenges of the rising costs due to an ageing population. Regarding Brexit, the agency estimates that it could have a positive impact on Luxembourg, if financial companies decide to partially relocate from the UK to Luxembourg. .
Pierre Gramegna, the Minister of Finance, comments: 'This further confirmation of the AAA is an encouraging sign which confirms that government actions continue to come to fruition and that optimism regarding the development of Luxembourg's economy is in order. I also welcome the fact that the ADEM recently announced that the unemployment rate has been at its lowest since August 2012 But even facing such a positive development, one must not relent one's efforts. On the contrary, it is important to continue the investments in our infrastructures and to continue towards a modernisation of our legal and regulatory framework, while assuring sound public finances for the purpose of laying the foundation of a qualitative development in the years to come.
(Source: press release of the Ministry of Finance)