Fitch upgrades Ireland’s debt rating to highest since ’09

Ratings agency Fitch has upgraded Ireland’s sovereign debt rating to AA.

It is the first upgrade from Fitch in two years and the highest rating it has given to Irish debt since 2009.

The agency said it was taking the action due to a number of drivers, including Ireland’s very strong budget performance since 2022 which it said it expects to continue.

Fitch also said Ireland has a prudent domestic fiscal framework designed to mitigate risks from “the large and highly-concentrated windfall corporate tax revenue.”

It also cited the Government’s new savings funds announced last year which it said would strengthen the public sector balance sheet over the longer term.

The ratings agency also referred to the steadily declining trend of Ireland’s public debt, as well as its strong institutions and second highest GDP per capita among sovereigns that it rates.

Citing upcoming elections its said the composition of the next Government is uncertain, but “while a change to the fiscal rule is a possibility, we do not expect a sizeable shift in macro-fiscal policy.”

“The domestic fiscal rule is likely to remain better tailored to the Irish economy than the revised EU rules that will come into effect during 2024.”

Fitch does refer to the concentration risks associated with Ireland’s large multinational sector and also points to the weak domestic economy last year.

“We expect a gradual recovery in 2024, underpinned by the resilient labour market and a fast fall in inflation boosting real disposable incomes,” it said.

It also warned that the risks to its macroeconomic forecast are on the downside due to high geopolitical tensions and supply chain vulnerabilities.

This upgrade from AA- to AA is another positive development for Ireland,” said Dave McEvoy, Director of Funding and Debt Management at the NTMA as he welcomed the news.

“It is the third upgrade from a major ratings agency in just over a year, following those from Moody’s in April 2023, and Standard & Poor’s the following month.”

“Today’s upgrade is underpinned by several key drivers including Ireland’s improved debt position, pre-funded cash balances, long average maturity and low refinancing needs”.

The Minister for Finance also welcomed the upgrade.

“This is a welcome demonstration of the fundamental resilience of our economy and the success of this Government’s balanced and sustainable approach to budgetary policy,” said Michael McGrath.

“The Irish economy is in a good place, and this is reflected in our public finances which remain, at least at the headline level, robust.”

“It is remarkable that even with all the challenges we have faced over the last number of years that we remain on such a positive trajectory.”