INTERNATIONAL rating agency Moody’s, which downgraded Ireland’s AAA status last July, has left the country’s current “Aa1’ sovereign rating on the economy unchanged.
In its annual report on Ireland, it praised the Government’s action to date to halt the rapid deterioration in the national finances.
It said the Government has been “proactive” in so far as possible in its efforts to stem the deterioration of public finances but warned the country’s Aa1 rating would be severely tested in the period ahead.
The credit rating agency said the economy still has a number of plus points that will help it to battle through the current economic slowdown.
It is forecasting the economy will fall sharply by around 9% this year and by less than 3% in 2010 as the impact of the property bubble eases and global growth starts to pick up.
Moody’s projections are in line with other forecasters, including the Central Bank of Ireland.
Moody’s Investors Service says the economy has several plus points still working in its favour.
It lists the country’s strong investment spending and foreign direct investment (FDI) track record as playing a vital role in helping the economy to get back to growth in the years ahead.
“These factors have been aided by Ireland’s particular population dynamics, which benefit from the late-1970s baby boom, and immigration”, the report said.
“Ireland is also one of the least regulated OECD countries in terms of market openness and labour market structure,” Moody’s vice president Alexander Kockerbeck said.
The rating agency confirmed unemployment would peak next year .
It hit 440,000 for August or 12.2% of the workforce and is expected to peak at around 16% next year.
In July when it downgraded Ireland’s credit rating Moody’s said the Government’s initial corrective actions combined with its then low debt levels meant it had needed to carry out only a moderate downgrade in July.
It cautioned in its report that the downside risks to the existing Aa1 rating weighed heavier on the downside than on the upside, but said it saw no reason to change its stance at this time in the country’s economic cycle.
It would continue to closely watch the Government’s attempts to squeeze €4bn in savings in the next budget in December, but added it was not considering any further imminent downgrades to Ireland’s credit ratings.
Moody’s are forecasting a debt/GDP of 115% by 2011 with servicing costs amounting to 18% of general government revenue.
It has already signalled it would not follow Standard & Poors in a rapid round of downgrades but stressed the Government would have to make adjustments in its budgets to reflect the loss of income to the exchequer following the collapse of the property market last year.
© Irish Examiner Ltd. All rights reserved