Luxembourg retains its AAA credit rating

The international rating agency Moody's has confirmed Luxembourg's highest credit rating of AAA with a stable outlook. This decision reflects investor confidence in the government's policies and confirms the stability of the country's public finances amid continuing uncertainty in Europe. The authorities attribute this result to the Matenee wuessen budget strategy, which is focused on long-term growth and balanced spending.

Moody's emphasises that flexibility and diversification of the economy, as well as a significant volume of state assets, remain key factors. The quality of institutions and governance plays an additional role, a factor that is often decisive for small open economies. According to the agency, these advantages offset structural vulnerabilities: high dependence on the financial sector, long-term pressure from an ageing population on social spending, and moderate geopolitical risks.

After several years of subdued growth, caused primarily by a downturn in construction and the property market due to rising interest rates, economic momentum is expected to recover. Moody's forecasts an acceleration in real GDP growth to 2.1% in 2027. For an economy where financial services account for a significant portion of value added, stabilisation of the interest rate environment and adaptation to new lending conditions are key factors for further expansion.

At the same time, the agency allows for a gradual increase in public debt — from approximately 27% of GDP in 2025 to 28.2% in 2027. Even with the increase in defence spending — Luxembourg intends to bring it to 2% of gross national income as early as 2025 — the general government deficit will remain moderate. By European standards, this level of debt remains low and significantly below the eurozone average, which supports the country's high credit profile.

Moody's separately notes the strength of the regulatory and fiscal framework, as well as the effectiveness of financial sector supervision. The stable outlook reflects the agency's confidence in Luxembourg's ability to cope with the slowdown in economic growth in Europe. Additional support comes from high immigration, which is expanding the labour market, and specialisation in high value-added services, including asset management and cross-border financial transactions.