Scope Ratings reviews its ratings either yearly, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remains proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Luxembourg (AAA/Stable; S-1+/Stable) on 15 January 2021, incorporating the update from the sovereign methodology. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Luxembourg’s AAA rating is underpinned by its i) high income per capita; ii) sound public finances and low debt burden due to its robust fiscal framework; iii) euro area membership and effective institutional framework; and iv) a strong external position reflecting its significant net external creditor position. The government has effectively implemented a large fiscal package to support economic effects from the Covid-19 shock, which alongside the cyclical fiscal deterioration will cause the general government debt-to-GDP ratio to increase, but still remaining below that of peers. Scope deems Luxembourg to be well positioned to face the challenges posed by the Covid-19 crisis, also in view of favourable financing conditions and additional fiscal support from EU recovery funds. The economy’s exposure to developments in the external environment, its reliance on the financial services sector, and imbalances in the housing sector remain challenges.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thibault Vasse, Analyst.
The final ratings were first released by Scope on 19 October 2018

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