Ratings agency Moody’s raised it’s Ireland’s sovereign debt standing on Friday night, moving it to a level last seen in 2010, in a boost for the perception of the country with investors.
Moody’s raised Ireland’s foreign and domestic long-term issuer and domestic senior unsecured ratings to Aa3 from A1, the company said in an emailed statement. It moved its outlook for Ireland to “stable” from “positive,” as usually happens after it changes its rating on a security.
The upgrade moves Ireland back to the fourth highest level on Moody’s scale for the first time since 2010, before the IMF bailout during the financial crisis. The rating is important for some investment funds, which may be required to avoid buying sovereign debt rated below Aa3.
“The decision to upgrade the ratings to Aa3 is driven by the significant improvement of Ireland’s key fiscal and debt metrics, and Moody’s expectation that this improvement will be resilient to potential shocks, including to the country’s corporate sector and related government revenue,” Moody’s analysts including Petter Bryman said. “An established track record of prudent bank lending practices, and banking regulation and supervision also diminish the sovereign credit impact of potential property shocks,” it added.
Ireland’s debt office, the National Treasury Management Agency, welcomed the move, describing it as “positive.”.
It is “consistent with the recent performance of Irish government bonds, relative to our peers, which confirms Ireland’s place amongst semi-core European sovereign issuers,” Dave McEvoy, NTMA director of funding and debt management, said in a statement. “Ireland is now rated in the AA category with all the major global ratings agencies,” he added.
Moody’s expects the economy will continue to grow at a solid pace in the near to medium term, albeit slowing from the “exceptional rates of growth” in 2021 and 2022.
“Moody’s also expects that Ireland’s fiscal metrics will continue to improve in its baseline scenario, and remain robust in a downside of markedly weaker corporate revenue, as spending growth has remained contained despite the rapid growth of corporate tax receipts on 2021 and 2022,” it said.
“The stable outlook also reflects Moody’s expectation that risks to Ireland’s credit profile from domestic, geopolitical and banking sector sources will be contained over the near to medium term,” Moody’s added.
The agency also upgraded Ireland’s short term credit rating to Prime 1 (P1), the highest level.
Among its reasons for the upgrade, Moody’s cited the faster than expected decline of Ireland’s debt burden, which it now expected to “continue to to fall into 2023 and beyond.”
“Importantly, the improvements to Ireland’s fiscal strength are in Moody’s assessment also broadly resilient to potential shocks to the economy and government revenue,” it added.