Scope completed a monitoring review of Luxembourg
      FRIDAY, 05/08/2022 - Scope Ratings GmbH
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      Scope completed a monitoring review of Luxembourg

      No action has been taken on Luxembourg following a monitoring review.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for Luxembourg (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 3 August 2022.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on

      Key rating factors

      For the updated report accompanying this review, click here

      Luxembourg’s AAA rating is underpinned by its wealthy economy with solid fundamentals underpinned by high value-added activities, competitive sectors such as financial services or information and communication technology. These factors are reflected in a solid growth potential estimated at 2.5% and contribute to Luxembourg’s economic resilience. In addition, the country has sound public finances, with a good record of fiscal surpluses and a low debt burden both illustrating a conservative fiscal framework and prudent budgetary management. Finally, the strong external position reflected in significant current account surpluses, a net external creditor position and underpinned by euro area membership is an important strength.

      Luxembourg has demonstrated remarkable resilience during the Covid-19 crisis, thanks to the government’s large and multi-pronged fiscal support package, a favourable economic structure, as well as a careful and well-calibrated reopening in Q3 2020. As such, the Covid-19 pandemic has had a relatively mild impact on Luxembourg’s economy and public finances. The recovery has been strong with Luxembourg significantly outperforming expectations with real growth and the budget balance rising to 6.9% and 0.9% of GDP respectively in 2021. Rising inflationary pressures and supply-side bottlenecks, exacerbated by the war in Ukraine are weighing on the recovery, however. Growth is set to slow to 1.8% in 2022 and inflation to rise from 3.5% in 2021 to 5.6% as a result. Still, Luxembourg maintains ample fiscal buffers to face the shock and has appropriately provided near-term support to firms and households. As such the public finance outlook has weakened slightly in recent months but Luxembourg maintains its healthy fundamentals and has ample room to support its economy under current conditions. Scope projects its public debt to reach 27% by 2027, only 4.4pps of GDP above pre-crisis levels.

      Rating challenges include: i) a small, open economy that is exposed to developments in global taxation frameworks and international financial markets; ii) long-term fiscal pressures linked to population ageing and generous social security systems; and iii) rising financial vulnerabilities from rapidly increasing real estate prices and elevated private debt levels.

      The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

      The rating/Outlook could be downgraded if, individually or collectively: i) Luxembourg’s economic outlook deteriorates substantially; ii) fiscal fundamentals deteriorate significantly; and/or iii) vulnerabilities in the financial system were to weigh on the country’s macro-economic stability.

      The methodology applicable for the reviewed ratings and/or rating Outlooks (Rating Methodology: Sovereign Ratings, 8 October 2021) is available on
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst: Thibault Vasse, Associate Director.

      © 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

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