Fitch up­grades out­look on Ire­land

The Pak Banker - - Front Page -


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.

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