Boost for economy as Moody's upgrades debt rating to stable
RATING agency Moody's has sounded an upbeat note about Ireland's economic prospects as it upgraded Irish sovereign debt from negative to stable.
The news is sure to please the Government, which has been campaigning for an up-grade from junk status for some time.
It comes as official data shows that Ireland exited a double-dip recession and the economy is growing again.
However, the agency also warned the Government against easing off on austerity.
"It's a very significant step and you will see Irish bond yields move significantly lower on this first thing on Monday morning – there is absolutely no doubt about that," said Ryan McGrath, a Dublin-based bond dealer with Cantor Fitzgerald.
Department of Finance secretary general John Moran met with officials from Moody's last week to discuss Ireland's rating.
In its latest update on Ireland published last night, the rating agency said the Government's progress in restoring solvency to the public finances was central to its decision.
The agency said that while economic growth was unlikely to return to pre-recession levels, it predicted that future growth would be more sustainable.
Meanwhile, the resumption of growth in the economies of Ireland's major trading partners, the UK and the eurozone, as well as continued expansion of the US economy, will support Irish growth "relative to its recent lacklustre performance", it noted.
And as Ireland prepares to exit the EU/IMF bailout programme, Moody's said there was a reduced risk of it losing access to financial markets.
"The Irish sovereign has demonstrated its ability to issue debt into the private markets on various occasions over the past year, which is a positive sign, even though investors have undoubtedly derived assurance from the presence of the support programme," it added.
The rating agency also noted that market perceptions about Ireland had shown little reaction to adverse events that were seen in some of the other troubled eurozone economies over the past year, such as Cyprus.
"This is a reflection of the progress that Ireland has made towards placing its public finances on a sustainable path, restoring competitiveness and illustrating once again the economy's underlying dynamism and attractiveness to foreign direct investment," it said.