The S&P rating reflects the favourable momentum of the Luxembourg economy, with growth estimated at 3.4% for the period from 2017 to 2020. This positive trend can be explained by a recovery in consumption as a result of the implementation of the tax reform in 2017, as well as sustained growth in financial services.
S&P is of the view that Luxembourg will continue to pursue a strong, balanced fiscal policy in the medium term. According to the ratings agency, government debt will stabilise at 18-19% of GDP over the period 2017-2020, and the budget balance will continue to show a surplus of around +0.3% of GDP for the same period.
Potential risks include the development of the property market and the challenges associated with changes to financial regulations and international taxation. In this respect, S&P welcomes the government's policy to support sustainable growth and emphasises its ability to react effectively to any new challenges.
As Luxembourg Finance Minister Pierre Gramegna commented, "Just a few weeks from the finalisation of the 2018 draft budget, this new confirmation of our AAA rating highlights the reliability and merits of the government's decisions for the management of the country's public finances. The "AAA" rating is an important sign of confidence for the Luxembourg economy. It emphasises the country's attractiveness for investors and encourages job creation."
Press release from the Luxembourg Ministry of Finance