Business Irish

Sunday 24 March 2019

Irish credit rating could get an upgrade to 'A' category, says Fitch

Thomas Molloy

IRELAND'S credit rating could rise into the single 'A' category, Fitch rating agency analyst Douglas Renwick told a seminar in London yesterday.

Mr Renwick said there was scope for Ireland's BBB+ rating to move higher if our bank debts could be shared out among eurozone states through the European bailout mechanisms. Fitch affirmed its rating for Ireland at BBB+ in November, but upgraded the outlook to stable. It was the first time Irish bonds were upgraded since the crisis began and the highest level since 2010.

"If there is an element of risk sharing, say perhaps through the ESM (European Stability Mechanism) over a bit of time, it could rise back to the single-A (range)," Mr Renwick said.

He added that Ireland may be able to exit its bailout by the end of the year.

"We think there's a good chance that Ireland might be able to regain full market access by the end of the year and exit the IMF programme without having to roll it over," the Fitch managing director added. "In terms of signalling, that would also be quite positive for the rest of Europe because it would demonstrate that these adjustments can actually work."

Adding to the positive sentiment on Ireland yesterday was a report from Goldman Sachs which said that we could exit the bailout programme later this year even if there is no deal on bank debts. Taoiseach Enda Kenny claims this is impossible, while Finance Minister Michael Noonan says an exit is possible even if there is no deal.

"Ireland is in a position to exit EU/IMF's aid programme this year even without a bank debt deal," Goldman Sachs economist Kevin Daly wrote in a note to clients.

Yields on Ireland's 2017 bond fell 2 basis points to 3.09pc.

The broadly positive assessment of Ireland's position came as Fitch said the worst of Europe's debt crisis was probably over and the odds were that no country would drop out of the euro.

Mr Renwick said the eurozone countries had shown their capacity to muddle through to some sort of resolution of their three-year debt crisis and a breakup of the bloc was now "very unlikely".

Despite its return to recession in 2012, he added that the eurozone was showing signs of improvement in key areas such as economic competitiveness.

Flare-ups and bouts of uncertainty would continue with elections in Italy and Germany and poor economic growth likely to test investors' nerves, he added.

David Riley, Fitch's global head of sovereign ratings, said the United States faced a "material risk" of losing its AAA status if there was a repeat of the wrangling seen in 2011 over raising the country's self-imposed debt ceiling. Fitch currently assigns the United States its highest rating of AAA, but with a negative outlook.

Irish Independent

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