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S&P upgrades Ireland on rapid economic growth

Ratings agency Standard & Poor’s has said Ireland’s economy is rebounding strongly and will see rapid economic expansion for much of the rest of the decade.

With economic growth driving the country’s national debt lower at a faster rate than it had anticipated, S&P yesterday raised Ireland’s credit rating to A+ from A, with a stable outlook.

It said: “Our upgrade of Ireland is premised on our expectation that the next government — likely to take office a year from now — will not deviate significantly from current fiscal targets and commitments.”

The S&P rating marks a positive end-of-term report on Ireland’s economic prospects. Unlike its rival Moody’s, S&P never pushed its rating of Irish government bonds into non-investment grade, or junk territory during the crisis.

However, yesterday’s report effectively says Ireland’s sovereign debt crisis, at least, is at an end.

The agency says that the economy surged 4.8% last year and predicts it will continue to expand, by 4.2% this year, the fastest rate in the eurozone. The forecast compares with the 4% growth rate projected for this year by the Government and the 4.4% expansion projected by the Economic and Social Research Institute.

Gross domestic product will continue to grow 3.8% in 2016 and by 3.2% in 2017 and 2018, S&P said.

“We forecast that the narrowing fiscal deficit, strong nominal GDP growth, higher state asset sales, and the further redemption of Nama’s senior bonds will bring net general government debt below 100% of GDP by the end of 2015,” it said.

A favourable outlook for exports and increased consumer demand would likely drive economic growth.

However, the agency, though predicting that unemployment will fall sharply from its current level of 9.8%, predicts the jobless rate will only drop to 7.5% by 2017.

The Government welcomed the report.

“This upgrade recognises Ireland’s commitment to restoring the public finances to full health and the significant progress made to date in this regard. It is also reflective of Ireland’s strong economic growth potential into the medium term,” said Finance Minister Michael Noonan.