Ireland's credit rating upgraded to A- by Fitch
GLOBAL ratings agency Fitch has upgraded Ireland’s credit rating as the country’s cost of borrowing fell to a new record low today.
Fitch upgraded Ireland tonight to A- from BBB+ with a stable outlook. Now two of the three main credit ratings agencies have Ireland in the A category after the upgrade by Standard & Poor’s in June.
The cost of borrowing also fell to a record low today as the yield on the 10-year bond dipped to below 2pc for the first time to 1.99pc.
That means the rate that the country is being charged to borrow money on the international markets is cheaper than that of the United States, the UK and France.
Finance Minister Michael Noonan said the upgrade reflects the progress that has been made in growing the economy, creating jobs, repairing the banking sector and improving the public finances.
“Ireland is now rated at A grade by two of the three main rating agencies, our international reputation continues to improve and the NTMA continues to do an excellent job in securing stable and low cost funding for the State,” Mr Noonan said.
“This upgrade will further support their funding plans and will have positive impact across the economy"
Fitch said Ireland had remained compliant with Eurozone and domestic budgetary rules and forecast the deficit would fall below the 4.8pc of GDP target this year.
It also highlighted the growth in employment and said it expects the economy to grow 2.2pc this year and 2pc between 2015 and 2016.
The 2.2pc rate is broadly in line with expectations from the Department of Finance, but lower than the 3pc projection from the ESRI.
It also said weaknesses in the banking sector have declined, and said the composition of growth will become more balanced as domestic demand turns more positive driven by private consumption and investment.
But it warned that very low inflation could act as a drag on the recovery.
The upgrade by Fitch, which is another sign of improved investor confidence in the country, means two of the big three ratings agencies have lifted Ireland into the A category.
Standard & Poor’s also upgraded Ireland in June to A- and predicted the economy would grow faster than it initially expected over the next two years.
Experts had been expecting yesterday’s upgrade as the ratings giant didn’t upgrade the country during its last review in February.
National Treasury Management Agency chief executive John Corrigan said the upgrade underpins the already strong investor sentiment and will widen the potential investor base for government bonds.
It is the latest positive assessment of the economy and comes just months before Mr Noonan is due to deliver a potentially much softer-than-expected Budget 2015 in the Dail in October thanks largely to better-than-predicted tax returns.
In June, Standard & Poor’s said it was raising Ireland’s long-term sovereign credit rating to A- from BBB+, with a positive outlook, meaning there’s a one in three chance of another upgrade in the next two years.
It came just weeks after Moody’s lifted the country’s rating by two notches to Baa1 in a better than expected assessment and was a sign of improved investor confidence in the country in the wake of the bailout ending.