Rating agency Moody’s has upgraded Ireland’s sovereign credit rating from A2 to A1 with a positive outlook.
The new rating is the highest given to Ireland by Moody’s since 2010 and its first update since 2017.
The agency said it had made the decision because the Covid-19 pandemic and exposure to the Russian invasion of Ukraine have shown that Ireland’s economic resilience has increased.
“Although there is still uncertainty about the ultimate macroeconomic impact from the terms of trade shock caused by higher prices for energy and other inputs to economic activity, the Irish economy is well positioned to absorb the negative impact of the conflict,” said. .
“The impact of any international agreement on corporate income tax reform also appears manageable. Ireland’s size and openness make it more vulnerable to shocks.”
“However, Ireland’s doubling in size measured in GDP over the last ten years, its strong growth record and growth potential, and competitiveness help mitigate these vulnerabilities.”
He also said that Ireland’s government debt has declined in the context of strong economic growth.
Moody’s said it expects this decline to continue for years to come.
“Strong economic growth and improving fiscal fundamentals, including six years of primary surpluses, put Irish debt ratios firmly on a downward path in the years leading up to the pandemic,” Moody’s said.
“While the government provided substantial support to the domestic economy, this had only a very marginal impact on the debt ratio due to the underlying resilience of the economy and favorable performance of tax revenues.”
“This meant that the pandemic did not delay the process of reducing debt ratios and improving the resilience of the government’s balance sheet.”
He added that he expects further fiscal improvement, with a smaller fiscal deficit this year and a return to surplus in 2023 as temporary pandemic support measures are withdrawn and strong economic activity boosts tax revenue.
Moody’s also maintained Ireland’s short-term rating at the higher level of P-1.
“This is a strong endorsement of the resilience of the Irish economy,” said Frank O’Connor, Director of Finance and Debt Management at the National Treasury Management Agency.
“This is the third update from a major rating agency in recent months, following updates from DBRS Morningstar and Fitch earlier in the year.”
“This pattern of improvements adds to the positive sentiment among investors towards Irish sovereign debt, which strengthens our ability to attract a broader group of investors and increase liquidity in our issuance.”