DUBLIN – Standard & Poor’s raised Ireland’s credit grade one notch to A and declared Friday that the country is rebounding with surprising strength from its 2010 international bailout.
The New York-based ratings agency issued its report after Dublin markets closed. It raised its forecast for Irish economic growth to 3.7 per cent annually through 2016, versus its previous forecast of 2.7 per cent, and credited the Irish government with reducing its debt burden more rapidly than expected.
Ireland is now two notches below S&P’s top AAA grade, which it lost in 2008 as the country started to throw billions into saving its six domestic banks. That effort ultimately failed, overwhelming Ireland’s ability to borrow on bond markets and forcing it to seek a three-year emergency loan package from European Union and International Monetary Fund partners.
Ireland exited that support in late 2013, and since then its economy has accelerated and borrowing costs have fallen to record lows.
Growth is expected to exceed 4 per cent this year, leading the 18-nation eurozone. Unemployment this week fell to a five-year low of 10.7 per cent, and Ireland has officially ended six years of austerity with a 2015 budget featuring modest tax cuts and benefits rises.
Finance Minister Michael Noonan welcomed the S&P findings and said they would boost his chances to win increased investment from China during meetings next week in Beijing and Shanghai.
S&P says Ireland is outperforming fellow eurozone bailout recipients Greece, Portugal, Cyprus and Spain, particularly in job creation and debt reduction. It says a major difference is the recovery of the Irish property market, particularly in Dublin, where average sale prices have risen nearly 25 per cent over the past year.
The report said rising property prices had allowed the National Asset Management Agency, Ireland’s primary “bad bank” for managing property-based toxic debts, to sell off many seized properties and construction sites more aggressively and at better-than-expected prices. Those recovered losses mean Ireland’s national debt is declining more quickly.
