Business Irish

Saturday 20 January 2018

Ratings agency S&P pours cold water on Government's growth forecasts

It says GDP will rise by 1.5pc next year not 2pc as Department of Finance expects

Colm Kelpie

Colm Kelpie

GLOBAL ratings agency S&P has poured cold water on the Government’s growth projections next year.

It said GDP would rise by 1.5pc, not the 2pc forecast by the Department of Finance.

That forecast also puts it at odds with the bullish assessment by the Economic and Social Research Institute (ESRI) earlier this week of 2.7pc growth.

It shows that some of the international observers are not as confident about growth levels as the domestic experts.

The International Monetary Fund said yesterday that the economy would grow 1.7pc next year.

Despite this, however, S&P said Ireland will still come well within the target of reducing the budget deficit to below 3pc of GDP by 2015 and gave an upbeat assessment of Ireland’s prospects.

It also reaffirmed its view that there was more than a one in three probability that it could raise its long term ratings on Ireland in the next 18 months.

S&P reaffirmed its BBB+/A-2 long- and short-term foreign and local currency sovereign credit ratings on Ireland.

But in bad news for Europe, it cuts its long term-term credit rating on the EU to AA+ from AAA, citing tensions on budget negotiations.

On Ireland, the ratings agency said it believes Ireland will continue to reduce its general government debt burden through a combination of austerity measures and asset sales.

“The outlook remains positive, reflecting our view that there is a more than one-in-three probability that we could raise our long-term ratings on Ireland in the next 18 months,” it said.

It said the economy was stabilising and that unemployment was starting to decline while private sector employment numbers are improving.

It said it would raise the rating on Ireland if growth exceeds the “relatively cautious” projection of a gradual recovery to slightly more than 2pc on average GDP growth from 2015, or the government debt reduces at a faster pace than expected and banks’ asset quality improves.

Meanwhile, fellow ratings giant Moody’s, which continues to rate Ireland at junk status, last night downgraded AIB’s deposit rating and altered its outlook to stable. 

 

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