This is in line with the ratings of the other major agencies.
In its analysis, S&P emphasised the flourishing character of Luxembourg's economy, the efficiency of its institutions and public governance, as well as the prudent budget policy pursued by the Government. The agency is anticipating average GDP growth of 3.4% for the period 2017-2020. In particular, it expects a strengthening of household consumption following the implementation of the 2017 tax reform.
The report also highlighted the diversified nature of the financial centre, which remains a driving force for growth. With regard to risks, the report points to the evolution of international tax rules, challenges raised by changes in banking regulations, and the long-term financing of the pension system. As for the direct impact of Brexit on the Luxembourg economy, the agency believes that this will be limited.
S&P noted that the level of public investment in the Grand Duchy, including infrastructure, is among the highest in Europe. The Grand Duchy’s stable outlook also stems from the fact that the agency believes the Grand Duchy will continue to maintain a budgetary balance while adapting to changes in international corporate taxation, and will manage to maintain a positive budget balance for public administration in the coming years. This would stabilise the level of public indebtedness at 22-23% of GDP.
(Source: press release from the Ministry of Finance)