Monday 26 September 2016

Budget gets OK from rating agencies

Published 17/10/2015 | 02:30

Fitch
Fitch

The three most influential global debt rating agencies have delivered broadly favourable verdicts on Budget 2016.

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The Budget announced on Tuesday won't overheat the Irish economy, Standard & Poor's (S&P) said yesterday.

It was the last of the three main agencies to give its assessment on the spending plans which have provoked a controversial reaction from Professor John McHale, the head of the State's own independent watchdog the Fiscal Advisory Council, who said the plans were too expansionary.

S&P said the pre-election Budget was "expansionary, as expected, but unlikely to derail fiscal consolidation".

Earlier its rival Moody's said the Budget signalled a "loosening of fiscal policy" but that the country was still on course to meet deficit targets.

A third agency, Fitch, warned that the Budget announced was pro-cyclical and therefore more likely to drive economic volatility, but said that on the whole the package would support deficit reduction.

Crisis

In its post-Budget assessment, S&P said Ireland's strong growth in the past few years had stemmed from the economy rebounding from a deep financial crisis, but the overall size of the economy would return to 2007 levels this year.

Moody's view will be closely watched by the Government because it is the last of the big rating agencies not to regard Irish government debt as a high quality 'A' rated investment.

Reacting to the Budget, Moody's said Ireland's public finances were improving at a very fast pace, which was credit positive. Increased spending, including the supplementary increase to the 2015 Budget that have been announced by the Government is feasible without endangering the budget targets because tax - especially corporation tax - is likely to come in €2.3bn ahead of target this year.

"However with that said, the Budget signals a loosening of fiscal policy compared to previous years, with the Government fully using the fiscal space that the domestic and European fiscal rules allow," it added.

The Budget has now been sent to the European Commission for final sign-off.

Irish Independent

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