ONE OF THE WORLD’S most influential ratings agencies has removed its negative outlook on Ireland’s credit rating – the first step in a potential upgrade in the national credit rating.
Fitch said it had revised its outlook on Ireland’s sovereign debt, changing it from ‘negative’ to ‘stable’.
Ireland’s rating remains at BBB+ – three categories below the top AAA rating – but the change means a further downgrade of Ireland’s status, which would have pushed it into ‘junk’ territory, is no longer anticipated.
In its published rationale, Fitch said Ireland’s fiscal consolidation “remains on track, broadly in line with the original trajectory of the EU-IMF programme”.
The agency said that the risks surrounding Ireland’s programme of financial belt-tightening had “narrowed and become more balanced”.
“Fiscal policy has so far successfully managed to meet the fiscal targets without excessive adverse impact on economic growth in 2011-2012,” it said.
However, it warns that significant work is still required in order to bring the budget deficit below 3 per cent of GDP by 2015, as is required under the EU-IMF programme.
The agency forecasts economic growth of 0 per cent for this year, but suggests that this would still be ahead of the eurozone average, which it expects to be -0.5 per cent.
“Ireland has made significant further progress in returning to market financing, issuing five- and eight-year bonds in August and September at lower yields.
“However, Ireland’s rating remains constrained and faces downside risks from its high public and private debt levels, persistent vulnerabilities in the financial sector and its sensitivity to external demand and financial conditions.”
This evening a spokesman for the National Treasury Management Agency welcomed the Fitch announcement.
“It is encouraging that Fitch acknowledges the continued progress Ireland is making on the fiscal side and the improved access to capital markets as reflected in our bond market engagements this year,” he said.
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