DBRS Morningstar confirms Luxembourg's "AAA" rating

L'agence de notation de crédit DBRS Morningstar a confirmé vendredi soir, le 11 novembre 2022, la notation "AAA" du Grand-Duché de Luxembourg, avec perspective stable.

© Philippe Schroeder DBRS Morningstar confirme le "AAA" du Luxembourg
DBRS Morningstar confirme le "AAA" du Luxembourg

Despite the shock of the war in Ukraine, the rating agency believes that Luxembourg's growth and public finances remain strong. While real GDP increased again in the first quarter of the year, a contraction of 0.5% was recorded in the second quarter and the whole year is expected to see a certain slowdown in growth in view of the pressure exerted by high energy prices.

With an inflation rate of 8.8% in October 2022 (according to the European price index), DBRS Morningstar expects the negative impact of inflation on consumer and business sentiment to be mitigated from 2023 onwards by the implementation of the support measures agreed in the Tripartite framework.

At the budgetary level, the rating agency notes that the country has the necessary room for manoeuvre , while noting that the support measures in favour of households and companies should weigh on public finances in 2022 and 2023.

In the same context, DBRS Morningstar notes that Luxembourg's low level of public debt is a key factor in its credit rating assessment. Even if it were to increase slightly in 2022 and 2023, the Grand Duchy's debt ratio remains among the lowest in Europe. In this context, the agency stresses that the government remains committed to keeping the public debt below 30% of GDP.

DBRS Morningstar believes that the overall situation of the banking sector remains solid and that a downgrade is unlikely, provided that the attractiveness of the financial centre is preserved and as long as the volatility of the financial markets does not cause a major shock. According to the agency, Luxembourg's credit rating is also supported by the high quality of public institutions and the country's political stability.

Finance Minister Yuriko Backes commented: "I am particularly pleased with this confirmation of the 'AAA' rating, as it is the first one after the Tripartite meeting last September and following the presentation of the draft 2023 Budget. This decision testifies to the soundness of the successive packages of measures in favor of households and businesses and at the same time reminds us that a responsible and far-sighted policy continues to be required in order to preserve a favorable outlook for the future."

Press release by the Ministry of Finance

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