PARIS : Rating agency Fitch revised Ireland’s sovereign credit rating up a notch to ‘A-’, citing an “employment-led recovery” with a healthier banking system. Fitch is the second of the big three agencies to pull Ireland’s rating up from ‘BBB+’ to ‘A-’ and thus higher into investment grade territory. In June Standard & Poor’s was the first to do so, citing the eurozone member’s improved domestic prospects. However while S&P gave Ireland’s economy a positive outlook Fitch was more cautious looking forward, giving it a stable outlook. Debt-plagued Ireland became the first of the bailed-out eurozone nations to exit an EU-IMF rescue programme last December — three years after seeking help to keep its economy from collapsing completely.
As part of the rescue deal, Ireland agreed to painful austerity measures including spending cutbacks, state asset sales and tax hikes.
Since 2008, there have been tax increases and spending cuts in seven consecutive budgets amounting to almost 30 billion euros as the government sought to bring outgoings in line with income.
“Market financing conditions have steadily improved over the past two years since Ireland returned to the markets,” the agency said in its report, forecasting 2.2 percent growth this year and 2.0 percent in 2015-2016. That growth “will become more balanced as domestic demand turns positive driven by private consumption and investment,” Fitch said.
“The improving labour market conditions have positive spill-over effects for heavily indebted households, the housing market and public finances. Ireland also benefits from the strengthening recovery of its major trading partners, especially the UK,” the report added. Irish unemployment fell again in July to a fresh five-year low, as the eurozone nation continues its recovery.
Vulnerabilities in the banking sector have also declined, Fitch noted.
“Ireland has retained many of its structural strengths throughout the crisis. It is a wealthy, flexible economy.”