Friday 28 October 2016

Ratings agency Fitch upgrades Ireland's credit rating due to 'brisk' economic growth

Published 05/02/2016 | 22:13

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan

Ratings agency Fitch has upgraded Ireland's credit rating to A from A-, saying the economy is growing at a "brisk pace".

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The agency pointed out that the economy grew last year to the end of September by 7pc - the fastest among developed economies.

It said the economy will grow by around 4pc this year - up from the 2.4pc forecast in its previou assessment.

"Although investment growth remains volatile, the Irish economy is exhibiting much more solid fundamentals that will help sustain momentum in the short term," Fitch said.

"Stronger balance sheets, a continued strengthening of the labour market and rising household consumption should underpin robust domestic demand growth in 2016."

The agency said the election represented a risk, warning that polls showed that the result will be inconclusive.

It warned that a protracted period of instability and reliance on more "radical elements" to sustain the coalition risks weakening reforms.

"That said, throughout the crisis, Ireland has shown strong fiscal commitment and credibility, supporting our forecast that the next government will remain broadly compliant with EU national fiscal rules."

Fitch said the deficit will continue to narrow, but warnedabout the increased dependency on corporate tax income to drive revenue growth, "especially since the bulk of the corporate tax is concentraed in a small number of companies."

It also said that a British withdrawal from the European Union would carry significant risks for trade, investment and the financial sector.

The State's debt management agency, the National Treasury Management Agency, welcome the upgrade.

"Today's rating upgrade from Fitch reflects the positive trajectory of Ireland's debt dynamics and expanding economy, factors which underscore the healthy demand we've seen for Irish debt issuance," said Frank O'Cnnor, NTMA's director of funding and debt management.

"We've had a strong start to the year with positive investor sentiment central to the success of our recent 10 year syndicated bond deal which raised €3bn, half our minimum target for 2016."

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