IRELAND is the "standout" country when it comes to recovery and may bounce back more quickly than previously expected, rating agency Standard & Poor's has said in a report.
"Wage flexibility and investment inflows make Ireland a standout," S&P analyst Frank Gill wrote in a report on Europe's economies.
Highly indebted countries are making faster progress in rebalancing their economies than the rating agency had previously anticipated, the report says.
Rising exports are helping Ireland, Spain and Portugal, the report concludes. Greece is not benefiting from this trend and has seen exports fall.
Ireland, Spain, Portugal, and Greece all improved their current account positions last year.
"For 2013, we forecast that Spain, Portugal and Ireland will operate outright current account surpluses, potentially enabling them to post an earlier recovery of GDP (gross domestic product) than we had previously anticipated," the report said.
Current account surpluses occur when countries receive more in payments for selling domestic goods than they do in payments buying imports.
S&P highlighted Ireland's reduction in unit labour costs – with cuts to both public and private sector wages as well as large-scale job cuts, especially in the construction sector.
The report says Spain's unit labour costs also fell but blamed the decrease on rising unemployment.
The rating agency said Ireland and Estonia are both champions when it comes to attracting foreign investment.
Still, it adds that Ireland's figures are flattered by accounting tricks while Estonia is good at getting manufacturing investment from Nordic parent companies.
While the tone of the report is positive, S&P still has concerns: "We consider high unemployment – at just under 27pc in Spain, 16pc in Portugal, and 15pc in Ireland – a threat to cohesion across Europe. "This is particularly so, as labour mobility remains limited, except in Ireland," the report adds.
The dark cloud on the horizon is Greece where the current account deficit has decreased due to plummeting imports.
"An export recovery has failed to take hold in Greece ... exports of Greek goods and services remain below 2008 figures," S&P said.
Yesterday's report is significantly more bullish than a report by the same rating agency published last month, which warned Irish banks might need "yet more capital" before returning to normal lending.
The agency said there were "prevailing downside risks" to the stability of the financial sector and uncertainty over economic growth and the high levels of unemployment.
S&P rival Fitch told the 'Wall Street Journal' last week that it was unlikely to take a more favourable view of the Government's credit rating unless there was a "substantial" agreement with the ECB to reduce Irish debts.