Luxembourg retains triple A credit rating

Rating agency Standard & Poor's has confirmed Luxembourg's AAA rating with a "stable" outlook.

On Friday, the agency issued the Grand Duchy of Luxembourg with the sovereign rating AAA for long-term debt and A-1+ for short-term debt.

According to the Finance Ministry, Standard & Poor's AAA rating was awarded based on the good resilience to external shocks of the country's economy and public finances, in particular because of the high degree of economic prosperity and net assets held in the state's portfolio, including the existence of a large pension pool.

Standard & Poor's issued the country with a "stable" outlook, highlighting its political stability and the robustness of public finances as strong assets which should enable it to cope with potential external shocks.

According to Standard & Poor's, the growth rate of GDP of Luxembourg's economy is expected to be around 2 percent from 2013 to 2016.

Stability despite challenges

This growth is largely driven by financial services where the report notes that the importance of the funds industry will continue to be a vector for growth.

Indeed, assets managed by funds domiciled in Luxembourg reached a historic high of 2,500 billion euros at the end of 2012, a figure that represents more than a quarter of the total assets under management in European funds.

Despite challenges facing the banking sector, such as the introduction of the automatic exchange of banking information from 2015 and the costs of compliance with new regulations, Standard & Poor's believes that the banking system will remain profitable over the period 2014 to 2016.

Standard & Poor's also believes that the size and diversification of the financial sector can offset a less sustained overall growth and increasing regulatory pressure.

With regard to fiscal policy, the rating agency notes that the government has put in place a medium-term budgetary framework in 2014 and notes that the budgetary impact of the country's aging population is a long-term challenge to the sustainability of finances public.