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Thursday 28 August 2014

S&P: We're not so Poor now as A credit rating is regained

Colm Kelpie

Published 07/06/2014 | 02:30

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Standard & Poor's has raised our credit rating
Standard & Poor's has raised our credit rating

A global ratings agency has upgraded Ireland's credit rating and predicted the economy will grow faster than it expected on average over the next two years.

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Standard & Poor's is raising its long-term sovereign credit rating from BBB+ to A-, with a positive outlook, meaning there's a one in three chance of another upgrade in the next two years.

It is the latest sign of improved investor confidence in the country and is a boost to the Government, which this week hinted that the Budget in October could be less than the €2bn stated adjustment.

The possibility of a less severe Budget is thanks to better than expected tax figures – and the upgrade by S&P could add a further boost to the economy.

S&P is the first of the big three ratings agencies to move Ireland into the A category since we left the bailout late last year, and comes just weeks after Moody's lifted the country's rating by two notches in a better than expected assessment.

The improved rating makes Ireland more attractive for international investors looking to snap up government bonds – but we're still six levels below the top AAA grade. The last time Ireland had an A rating with S&P was in April 2011.

Finance Minister Michael Noonan said: "I am particularly pleased that this upgrade is being driven by S&P's view on the improved prospects for the domestic economy.

"With thousands of jobs being created each month, strong Exchequer performance and with positive high-frequency indicators, I'm confident we are moving in the right direction."

Taoiseach Enda Kenny said: "This is a further expression of confidence in the country from purely objective markets and in that sense we hope it will lead to continued confidence for the growth of jobs in the country."

S&P said it had revised its 2014-2016 average GDP growth rate upwards from 2pc to 2.7pc. It said this reflected its expectation of a continued strong external performance and a sustained recovery in the domestic economy.

S&P said it believed the domestic recovery was broadening and had gathered pace in the first three months of the year.

It expressed concerns about the number of mortgages in difficulty, estimating that it could be as high as 26.5pc. However, it noted that banks were working through the problem.

The State's debt management agency, the National Treasury Management Agency (NTMA), said it was the first A rating of any of the major credit rating agencies since it returned to the international money markets on a full-time basis.

"It is gratifying to note that the bond market access achieved and the progress made by NAMA are among the positive factors cited by S&P," NTMA chief executive John Corrigan said.

Irish Independent

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