Credit rating agency Moody’s Investors Service on Saturday raised Ireland’s sovereign debt rating, citing confidence in the eurozone member’s ability to further cut its deficit after finally forming a government.
Moody’s, which pointed also to a strong economic recovery in Ireland, raised its key rating for the country’s sovereign debt by one notch to “A3” from “Baa1,” adding that the outlook on the long-term rating remains “positive.”
It said in a statement that “while a UK exit from the EU would have negative repercussions on Ireland, given the close economic ties,” it considers “that this risk would be manageable for the Irish economy.”
Ireland’s close trading partner Britain votes in a referendum on June 23 to decide whether to remain part of the 28-nation EU.
Regarding Ireland, Moody’s said that “the risk of a reversal of the fiscal consolidation seen over the past several years is low.”
“The recent political agreement between the two largest parties in parliament and the recent election of a minority government led by Fine Gael, which has established a strong track record of fiscal management over the past several years, give comfort that the budget deficit will be reduced further in coming years,” it added.
Ireland’s parliament last week re-elected Enda Kenny as prime minister at the head of a minority government following a deal aimed at a slight easing of austerity.
Separately, Moody’s cut Poland’s outlook from stable to negative over “fiscal risks” posed by its right-wing government, but left its investment grade at “A2” unchanged.
Moody’s change in Poland’s outlook was the first in more than a decade and comes after a deeper ratings cut in January by Standard and Poor’s, which blamed the government led by the Law and Justice party for “weakening institutions.”
“Poland has a large, diversified economy that has shown robust real GDP growth in recent years, despite being exposed to significant external headwinds at the time of the global financial and euro area debt crises,” Moody’s said in a statement.
Poland’s finance ministry welcomed the unchanged rating following market speculation about another downgrade.
The “rating is one notch higher than Fitch’s rating and two notches higher than Standard and Poor’s rating from January this year,” a ministry statement said.
Polish Finance Minister Pawel Szalamacha on Saturday said that he expected Poland’s battered zloty currency to “strengthen” on the Moody’s assessment.
Meanwhile, Saudi Arabia suffered another cut to its credit rating on Saturday as Moody’s downgraded the kingdom along with Bahrain and Oman because of the slump in oil prices.
Moody’s lowered its long-term rating for Saudi Arabia to “A1,” which denotes low credit risk, down from “Aa3,” saying that lower energy prices “have led to a material deterioration” in the profile of the top oil exporter.
“A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the kingdom less well-positioned to weather future shocks,” it added.
However, ambitious plans announced by Riyadh to diversify its economy could lead to a credit ratings upgrade in the future, Moody’s said.
Fellow agencies Standard and Poor’s and Fitch have also downgraded Saudi Arabia in recent months.
Moody’s lowered its rating for Bahrain to “Ba2,” which indicates substantial credit risk, from “Ba1,” with a negative outlook.
It warned that the country’s government debt burden was expected “to deteriorate significantly over the coming two to three years.”
Moody’s also lowered its rating for Oman to “Baa1,” which denotes moderate credit risk, from “A3,” warning the sultanate was “vulnerable to an oil price shock” given its heavy reliance on energy revenues.
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