Luxembourg was once again praised for its stable economy by the rating agencies Fitch Ratings and Scope Ratings, who confirmed its 'AAA' on Friday. However, they warned against a future challenge regarding pensions.
The rating agencies acknowledged the Grand Duchy's sound financial system, maintained by its 'solid economic fundamentals', as well as by its 'prudent budgetary management,' announced the Ministry of Finance. The triple-A rating is significant, as it allows the state to borrow at good rates.
Scope Rating in particular highlights Luxembourg's rich, high-value economy, which, combined with its solid financial situation and robust external positions, has contributed to the country's economic resilience, adds the ministry. Indeed, Luxembourg sets itself apart with its relative low debt (25.7%) while maintaining high incomes for its inhabitants.
Both agencies forecast an economic recovery for 'the medium term’. Statec estimates that growth will reach 2 per cent in 2024, after bottoming out in 2023 (-1.1%).
However, Fitch Ratings and Scope Ratings warned of pension-related pressures in the future. Luxembourg's long-term worry is that pension spending will soar until the reserve is exhausted in around twenty years' time. The government is currently hoping to resist this by means of a pension reform that is currently being drawn up.
