Ireland’s credit rating was raised by Moody’s Investors Service, as the economy continues to outpace the eurozone and its debt level drops.
Moody’s raised the rating to A3 from Baa1 with a positive outlook, the company said in a statement, Bloomberg reported.
“Ireland’s key credit fundamentals have continued to improve at a faster pace than expected even a few months ago, including a stronger economic recovery and a more marked reduction in the public debt ratio,” the ratings company said.
Moody’s awarded Ireland its top grade in 1998 before cutting it to junk in 2011 after the collapse of the real-estate market crippled the nation. While the ratings company restored Ireland’s investment grade in 2014, the lack of an A-rating meant some investors weren’t allowed to buy the debt.
“This proves Ireland is progressing in the correct direction,” Finance Minister Michael Noonan said in a statement. “The decision shows that Moody’s are confident that the Program for Government, published earlier this week, will reinforce that upward trend.”
To an extent, investors, who often ignore rating changes, have already upgraded their view of Ireland. This week, the country’s debt office sold 2022 bonds at its weighted average yield of 0.157%.
Debt Ratio to Drop
Ireland’s economy will expand 4.9% this year, more than double the pace of the eurozone, according to the European Commission. The debt ratio will drop to about 89% of gross domestic product this year down from 120% in 2013, the commission estimates.
Moody’s said Ireland’s GDP will expand about 5% this year and 3.5% next year, and it downplayed a possible setback for the country should the UK vote to leave the European Union in a referendum next month.
“While a UK exit from the EU would have negative repercussions on Ireland, given the close economic ties, Moody’s considers that this risk would be manageable for the Irish economy,” according to the statement.
The ratings decision also reflected the deal this month that ended two months of political deadlock and reelected Prime Minister Enda Kenny.
“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,” Moody’s said.
