Luxembourg’s economy appears to have weathered the storm of the covid pandemic particularly well, according to credit ratings agencies S&P Global and DBRS Morningstar. Both agencies last Friday confirmed that the grand duchy retains the best possible AAA ratings, noting that the country has shown greater resilience than other countries to the shock of the pandemic.

Finance minister Yuriko Backes said the double confirmation “underscores the soundness of the government’s economic and fiscal policy before and during the health crisis.” Indeed, Luxembourg’s GDP contracted by just -1.8% in 2020 compared to -6.5% on average in the euro area. In 2021, Luxembourg rebounded sharply to reach +7%.

“Luxembourg continues to remain attractive to companies and investors despite an uncertain international environment,” Backes added.  “In addition, the government sees this as encouragement to pursue its economic policy of sustainable growth for the country and its citizens.”

In a communiqué issued by the ministry on Saturday, the government said it had “supported the country’s economy effectively throughout the health crisis, without jeopardising the sustainability of public finances. This has been made possible by the government’s forward-looking policy and fiscal flexibility in previous years.”

The ministry says that the ratings also reflect Luxembourg’s economy being well placed to face potential external risks, including the possible impact of changes in international business taxation. “Any temporary shocks in the financial sector can be dampened by the diversity of activities in [Luxembourg] market. More generally, the maintenance of a relatively low level of public debt provides a cushion against the possibility of unforeseen events,” the statement concludes.