The three credit rating agencies – DBRS, Fitch and Standard & Poor’s – have confirmed Luxembourg's triple A credit rating despite the coronavirus pandemic. The triple A rating is the highest score awarded by a financial analysis company.
After confirmation of the 'AAA' rating of the Grand Duchy by Fitch and DBRS, the agency Standard & Poor's (S&P) announced on 11 September, after markets closed, that it was maintaining Luxembourg's triple A rating as well, reflecting its stable prospects.
Despite the crisis context, the three agencies indicate that the Grand Duchy has the necessary capacity to cope with the economic consequences of the Covid-19 pandemic. "I am very pleased to see that Standard & Poor's has joined the other two agencies in maintaining the triple A rating and indication of stable prospects, and is emphasising that the Government's economic policy is justified in countering the effects of the Covid-19 pandemic", said Minister of Finance Pierre Gramegna.
Excellent prospects thanks to a forward-looking policy
DBRS Morningstar and Fitch consider that the recession in the Grand Duchy will be serious, but less so than the average for the euro area, and that the economy ought to bounce back to pre-crisis levels in 2021. The two rating agencies thereby confirm that, despite the difficult economic context, the foundations of Luxembourg's economy remain solid.
In its analysis, S&P found that the country's public finances have the necessary capacity to absorb the negative impact of the crisis. The rating agency points to the Grand Duchy's favorable starting point, which featured healthy public finances. In this context, S&P also highlights the effectiveness of the Government's two economic packages: the Covid-19 stabilisation programme and the 'Neistart Lëtzebuerg' scheme, in as much as these initiatives will help to reduce the risk of lasting negative effects on the economic activity of the Grand Duchy.
Biotechnology and health-related technologies form a key element in the strategy for the diversification of the Grand Duchy's economy. The development of this sector is in the hands of the Luxembourg HealthTech Cluster.
Economic mission to the United Arab Emirates (UAE) in January 2020. The aim of this meeting was to maintain the Grand Duchy's close economic and political relations with the UAE and promote the Luxembourg financial market in the region.
An attractive destination for investments
Despite a less favourable external environment and potentially feverish circumstances, and the uncertainty surrounding the evolution of the Covid-19 pandemic, the rating agencies consider the risks facing the Grand Duchy to be controllable as long as the country continues to follow its prudent economic and financial policy.
DBRS also acknowledges the Government's sustained effort in the field of fiscal transparency and considers that the Grand Duchy ought to remain an attractive destination for investments.
S&P is expecting improved growth prospects for the country starting in the third quarter of 2020. The consumer and business trust indicators and the data on sector activity point to economic recovery having started already, showing that the economic foundations remain solid. For S&P, the Grand Duchy's sustainable, responsible budget policy is one of its main assets in favour of sustainable economic growth.