DBRS Confirms AAA rating for Luxembourg with Stable Trend

As of Friday 22 September 2017, the rating agency DBRS has confirmed the rating “AAA” of the Grand Duchy of Luxembourg with a stable trend.

Among the key factors that justify maintaining the highest possible rating, DBRS cites, among other things, the good performance of Luxembourg’s public finances. DBRS estimates that public debt will stabilize well below the Maastricht criterion and the lower threshold defined by the government, and that the fiscal balance will remain surplus for the years 2017 and 2018. The agency also points out that the debt Luxembourg is among the lowest in Europe.

In its analysis, DBRS emphasises the political stability and quality of Luxembourg institutions, especially with regard to the supervision of the financial sector, which it underlines as robust. The agency also recalls that the Grand Duchy is one of the first countries in terms of the governance indicators of the World Bank. This positioning reflects good governance and transparency, as well as the soundness of the regulatory and financial framework. Finally, DBRS highlights the purchasing power of Luxembourg households, which exceeds 2.4 times the euro area average.

Concerning the possible impact of Brexit on the Luxembourg economy, DBRS believes that this could prove positive, due to the opportunities arising from the setting up of new companies in the Grand Duchy.

At the risk level, DBRS cites vulnerability to external shocks, as well as uncertain trends in the international tax framework. Regarding the real estate market, the agency has raised the price increase since 2010, while considering that household debt rates remain reasonable. Accordingly, DBRS believes that the risks to financial stability are well under control.

Pierre Gramegna, Minister of Finance, commented: “A week after Standard and Poor’s reiterated its confidence in the Grand Duchy, I am delighted that a second agency is also confirming Luxembourg’s AAA rating. DBRS’s analysis highlights the excellent fundamentals of the Luxembourg economy, as well as its promising prospects, supported by an estimated growth of over 4%. Once again, this analysis highlights the soundness of the economic and financial policies implemented by the government.”​