On 16 March 2018, the rating agency Standard and Poor’s (S&P) announced that Luxembourg would maintain the highest rating, with a stable outlook.
In its analysis, the agency notes that the rating reflects Luxembourg’s prosperous economy and estimates that GDP per capita will be around 111,000 euros in 2018. According to S&P, the level of economic growth will average 3.3% for the period 2018 to 2021 and the increase in household consumption will continue at the same rate as in 2017, thanks to the beneficial effects of tax reform and wage indexation. S&P also notes that the financial sector remains a key sector, generating economic growth and accounting for nearly 27% of GDP.
In terms of public finances, the agency points out that Luxembourg is conducting a prudent fiscal policy and indicates that the Public Administration is recording budget surpluses on a regular basis. S&P estimates that this surplus will remain at 0.7% of GDP for 2018 and will remain, on average, at around 0.5% for the period 2019 to 2021 The effectiveness of the fiscal policy is also reflected in the fiscal measures that have been taken to curb public spending and that Luxembourg has been able to absorb the decline in fiscal revenues following the loss of VAT on e-commerce. In terms of risks, the analysis cites, in particular, the possible impact of potential changes in the financial regulation and taxation of companies at international level. The agency mentions, however, that these risks remain low and contained due to Luxembourg’s good governance, the diversification of its economy and the responsiveness of its government.
Minister of Finance Pierre Gramegna, commented : “I am pleased to see that after DBRS, Standard and Poor’s also confirms the favourable outlook for the Grand Duchy over the coming years. The analysis also shows that the financial centre contributes significantly to qualitative growth. This new ‘AAA’ confirmation reaffirms the validity of the government’s public finance policy and the alleviation of the tax burden during the 2017 reform.”