Luxembourg faces a demanding start to 2026: The government is stepping up efforts to attract international skilled workers in a number of sectors struggling to recruit, notably in healthcare and IT. It also has to reopen dialogue between the social partners to ease tensions following a turbulent year in 2025, and that one of the country’s main challenges is finding solutions to ease pressure on the housing market. The shortage of housing, high rents and soaring property prices have become a drag on the economy.
Nonetheless, the Grand Duchy is holding up reasonably well and the outlook remains stable. As of 30 January 2026, S&P Global Ratings, one of the world’s three major rating agencies, confirmed Luxembourg’s “AAA” rating with a stable outlook, according to the Ministry of Finance on Saturday.
This assessment “reflects the country’s financial strength”, despite a deterioration in the budget balance, notably due to pressures on defence spending, social policy, energy subsidies and measures aimed at reducing the cost of living, the ministry continued. By the end of this year, Luxembourg will allocate 2% of its gross national income to defense, which amounts up to nearly €1.2 billion.
According to the US-based agency, Luxembourg’s economy will benefit from continued improvement in the global economy and falling interest rates, which should allow real GDP growth to average 2.1% over the 2026–2029 period, the ministry added.
The Ministry of Finance also stressed that economic prospects are supported by robust domestic consumption.
The rating agency further underlined that Luxembourg remains attractive to investors, particularly thanks to the efficiency of its institutions, its political stability, its competitive financial sector and the predictability of its policies, the ministry concluded.
