Fitch upgrades outlook on Ireland
Global rating agency Fitch has revised the Outlooks on the Republic of Ireland’s (Ireland) ratings to Stable from Negative. At the same time, the agency has affirmed the Long-Term foreign and local currency Issuer Default Ratings (IDRs) at ‘BBB+’. Ireland’s Country Ceiling has been affirmed at ‘AAA’ and Short-term foreign currency IDR at ‘F2’.
The ratings of guaranteed issuance by National Asset Management Ltd (NAMA) have also been affirmed at ‘BBB+’ and ‘F2’, in line with the sovereign ratings.
Global rating agency Fitch affirmation and revision of the Outlooks to Stable from Negative reflects Ireland’s continued progress with its fiscal con- solidation, external adjustment and economic recovery, as well as the sovereign’s improved financing options. Fitch judges that the risks surrounding the adjustment path have narrowed and become more balanced, reflecting the following factors.
Fiscal consolidation remains on track, broadly in line with the original trajectory of the EU-IMF programme, which envisaged a 120% debt/GDP ratio in 2012, peaking in 2013-14 before declining. So far, Ireland has met all the quarterly fiscal targets of the programme. Fitch expects the 2012 deficit to be close to the target of 8.6% of GDP, implying a primary deficit of 4.5%, despite some expenditure overruns. More fundamentally, fiscal policy has so far successfully managed to meet the fiscal targets without exces- sive adverse impact on economic growth in 2011-2012. A strong improvement in competitiveness is supporting a substantial contribution of net exports to GDP growth and a further improvement in Ireland’s current account surplus, which Fitch forecasts at 2.4% of GDP in 2012. Although Fitch forecasts GDP growth at 0% in 2012, down from 1.4% in 2011, this would still be better than the eurozone average, which Fitch forecasts at -0.5%, and significantly better than other so-called peripheral eurozone countries, highlighting Ireland’s progress towards returning to economic growth.
In addition, Ireland has made significant further progress in returning to market financing, issuing five- and eight-year bonds.