Rating agency Standard & Poor’s (S&P) raised Ireland’s credit rating for a second time in six months, this time from A from A+, as the country’s economic recovery continues. (Source: The Wall Street Journal, June 5, 2015.)
On Friday June 5, 2015, S&P cited the country’s narrowing fiscal deficit, strong growth, and assets disposal as reasons for the upgrade. While an A+ is great, it still leaves Ireland four levels below the rating firm’s top rating (AAA).
In 2009, S&P was the first of three major credit agencies—the other two being Fitch Ratings and Moody’s Investors Service—to downgrade Ireland as the country’s borrowing costs rose as a result of the governments backing of its troubled banks.
At the end of the 2013, when Ireland exited the bailout program, S&P raised the nation’s credit ration to A from a crisis low of BBB+.
In 2010, the Irish government, as part of the International Monetary Fund’s (IMF) eurozone financial reforming program , agreed to reduce the size of deficit-to-GDP ratio.(Source: The Economic and Social Research Institute, last accessed June 5, 2015.)
The fiscal and economic growth conditions underpinning the 2015 budget have improved quite significantly over the past few years. In 2012, the Irish economy contracted 0.3%, turning positive in 2013 (0.2%). In 2014, Ireland’s economy expanded by five percent.
The country’s unemployment rate has also been improving, from a high of 14.7% in 2012 to 13.1% in 2013 to 11.3% in 2014.
Ireland exports grew at the rate of 5.6% in 2014. Its recent strong exporting performance has benefited from relatively robust growth in two of its main trading partners, the United States, and the United Kingdom.
S&P said it expects Ireland’s economy to grow by an average of 3.6% per year between 2015 and 2018. Ireland could be experiencing one of the fastest rates of expansion in the eurozone.
Ireland is rated A- at Fitch Ratings and Baa1 at Moody’s Investors Service.