S&P’s reaffirms positive outlook

There was mixed news for Ireland’s credit rating with Standard & Poor’s reaffirming the positive outlook for the sovereign, which was offset by a series of downgrades by Moody’s for the covered bonds issued by the pillar banks.

S&P affirmed its long- and short-term foreign and local currency sovereign credit ratings on the Ireland at “BBB+/A-2”. The outlook remains positive.

S&P cited continued budget consolidation, improved economic growth and asset sales as reasons why the debt level is set to decline over the next few years.

“We expect that improving business and consumer confidence will spur economic growth to close to or slightly above 2%, which we see as Ireland’s sustainable trend growth rate. This rate is buoyed by Ireland’s favourable demographics, its openness, and its labour and product market flexibility,” it said in a statement.

“Given our economic and fiscal assumptions, we expect net general government debt to peak at 120% of GDP in 2013 and to decline to 107% by 2017. Our estimate of Ireland’s gross and net general government debt includes National Asset Management Agency (Nama) obligations issued to purchase loans and other distressed assets from participating Irish banks at a discount. Although we consolidate Nama’s debt into general government debt, we do not consider Nama’s assets, apart from cash and cash equivalents, as liquid. If Nama converts its housing and loan assets into cash through sale or redemption more quickly than we expect, Ireland’s general government debt net of liquid assets could commensurately decline faster than we project.”

However, Moody’s placed covered bonds issued by BoI, AIB and EBS on review for a downgrade.


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