Thursday 19 April 2018

An upgrade would make accessing markets easier – but it may be a while away

STANDARD & Poor's commentary last week cast a relatively upbeat assessment on Ireland's efforts, raising the prospect of an upgrade to the country's credit rating within the next two years.

Moody's comments yesterday were not quite as positive.

Firstly, it should be pointed out that this is a regular update to the markets and while it sets out the risks of a downgrade, it also lists what could help us get an upgrade.

Hopes were dashed in March when Moody's reaffirmed its negative view on the outlook for Ireland.

It had been hoped that some positive movement was on the cards in the wake of the deal on the Anglo Irish promissory note. Moody's latest credit opinion claims Ireland would move closer to an upgrade if the Government continues to meet its budgetary targets, supported by a resumption of sustained economic growth, allowing it to cut the high levels of debt and boost its ability to access the international money markets on a sustained basis.

Economic growth, while arguably affected in some ways by the approach taken by the Government in October's Budget, is largely dependent on external factors as the eurozone remains mired in recession.

And as we saw last week, S&P's view directly influenced the price that Ireland pays to borrow on the markets.

So ironically, positive moves toward a credit upgrade would carry huge weight and make Ireland's attempts to tap into the markets on a long-term basis potentially easier. But analysts believe an upgrade may yet be a while away.

Irish Independent

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