Sun, May 18, 2014 - Page 13 News List

Ireland rating upgraded two steps on faster growth

AFP, WASHINGTON

Moody’s raised its credit grade for Ireland on Friday by two steps, to “Baa1” from “Baa3,” citing the impact faster growth is expected to have on improving the country’s debt profile.

While the country still has a high level of public debt and sizable fiscal deficits, Moody’s forecast faster growth would reduce its debt ratio faster than had been expected.

“Moody’s expects Ireland’s economy to grow considerably faster than the euro-area average over the near-to-medium term,” the agency said.

“Domestic demand is now accelerating, led by a broad-based recovery in gross fixed investment, but also by a revival in private consumption spending despite households’ high debt overhang. Faster growth will support ongoing fiscal consolidation and put the debt on a firm downward trajectory.

At the same time, the recovery of the Irish property market has allowed the government to reduce contingent liabilities by selling off assets taken over in the financial crisis.

Moody’s said that puts Ireland in better shape going forward than other countries in the same ratings class, such as Italy and Spain, meriting the upgrade.

Ireland exited a tough three-year bailout program of the IMF and EU in December last year, necessitated by a banking crash and the implosion of the housing market in 2010.

Under the program, the government was pressed to implement austerity measures to shore up its finances, and the economy still contracted by 0.3 percent last year.

The program boosted confidence in its finances and allowed Dublin to return to commercial debt markets for funding in January.

Ireland still had a fiscal deficit of 7 percent of GDP last year and Moody’s said it could be downgraded if it fails to cut that to below 3 percent of GDP next year.

“All ... three main rating agencies now have Ireland rated at ‘BBB+’, which clearly ... reflects the confidence in Ireland shared by investors generally,” Irish National Treasury Management Agency chief executive John Corrigan said.

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