Standard & Poor’s has kept Ireland’s rating unchanged at AA- with a stable outlook following Saturday’s general election.
The ratings agency said the outcome, which saw Sinn Féin finish as the second largest party with 37 seats, may lead to a shift in the country’s policy settings, “including toward a more relaxed budgetary stance, despite still-high public debt.”
While it is unclear yet how a government will be formed, early indications suggest Mary Lou McDonald will heap pressure on Micheál Martin to go into power by presenting him with a ready-made coalition.
Sinn Féin will seek to get the Green Party and Social Democrats on board before talking to Fianna Fáil about forming a government.
The process of forming the next government is likely to be a drawn out one.
In a note today S&P said the next government here may choose to relax its budgetary stance by increasing public spending on investment and for social needs, without bringing in revenue-raising measures to off-set this.
S&P added that weak inflationary pressures and the European Central Bank's monetary stance mean that currently negative real interest rates across the whole of Ireland's yield curve are likely to remain, even if the country’s public deficits increase.
On the matter of Ireland’s corporate tax rate, the agency does not anticipate any “significant” revisions to the policy.