Luxembourg retains its AAA rating: Strong fundamentals and a stable outlook
On 23 October 2026, Fitch Ratings and Morningstar DBRS both reaffirmed Luxembourg’s AAA rating, with a stable outlook. S&P Global Ratings, Moody’s and Scope Ratings had already confirmed their highest sovereign ratings earlier in the year. Luxembourg therefore retains the top grade from all five agencies, reflecting continued confidence in its economic fundamentals, effective institutions and political stability.
According to Fitch, Luxembourg has the second-lowest ratio of public debt to gross domestic product (“GDP”) among its AAA-rated peers, at 26.0% at the end of 2025. The public sector also holds substantial net financial assets, providing a sizeable financial buffer. Fitch describes the banking sector as resilient, with high levels of capital and liquidity.
Luxembourg’s fiscal position continues to compare favourably with that of most other euro area countries. The agencies nevertheless identify growing spending pressures, particularly from social expenditure and sustained public investment in infrastructure, housing, defence and the energy transition. Fitch expects the budget deficit to narrow in 2026 and 2027 before widening modestly in 2028, and forecasts public debt of 29% of GDP by 2028. Fitch’s forecast assumes that the authorities will take further measures to prevent debt from rising significantly above 30% of GDP.
The personal income tax reform was approved by the Chamber of Deputies on 28 October 2026 and is scheduled to apply from 1 January 2028. By introducing a single tax class, the reform aims to modernise personal taxation and support purchasing power through tax relief for most taxpayers. It also includes a 25-year transitional regime for eligible taxpayers currently assessed jointly.
The growth outlook points to a gradual recovery. Fitch forecasts real GDP growth of 1.2% in 2026, strengthening to 1.7% in 2027 and 1.8% in 2028. Citing STATEC, it also notes that Luxembourg’s potential growth is estimated at around 1% in 2026, compared with historical averages of approximately 3%. Improving productivity and competitiveness therefore remains important to strengthening growth over the medium term.
Luxembourg’s financial centre remains central to its economic strength. The agencies expect the sector to support growth in the coming years, while identifying global financial volatility and geopolitical developments as risks to monitor.
Low public debt, substantial public assets, strong institutions and a resilient financial sector continue to underpin Luxembourg’s highest credit ratings, providing a solid foundation for its investment and reform agenda.
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