In its analysis, the agency highlights Luxembourg’s positive economic outlook. With a growth of 3.4%, the real GDP growth exceeded the average of the euro area and it is forecast to reach over 4% in 2018. Public finances remain sound, despite the tax reform and the high level of investments maintained in the State budget for the 2018 financial year. The agency confirms the low level of public indebtedness of 22.9% for 2017, in other words well below the governmental objective of 30%.
A privileged destination for investments
DBRS also highlights that Luxembourg remains a privileged destination for investments. Luxembourg’s financial centre, which can rely on a highly qualified labour force, a competitive tax and regulatory framework as well as solid institutions, contributes to the Grand Duchy’s attractiveness and makes it an ideal domicile for multinational. The agency also considers that Luxembourg is in a good position to take advantage of the relocation of financial establishments to its financial centre within the framework of Brexit.
The agency also notes the potential risks related to external impacts at financial market level and the development of the international tax framework. However, Luxembourg’s strong economic fundamentals and the efforts made by the Government to diversify the economy will help relieve these possible pressures. Overall, DBRS regards risks relating to financial stability as limited.
As the Minister of Finance Pierre Gramegna put it: “The fact that the Grand Duchy retained the highest rating confirms, once again, that this Government’s policy since it first took office is bearing fruit. The government has rebalanced public finances sustainably, while undertaking major reforms and maintaining a high level of investments.”
(Source: press release of the Ministry of Finance)