Moody’s has issued a downbeat report on Ireland.
In its annual credit report the ratings agency says the domestic economy here remains weak as a result of the cutbacks the public has endured in recent years.
It says our Ba1 rating reflects “the significant deterioration in the government’s financial strength following the crystallisation of contingent liabilities in the banking sector and a severe economic contraction”.
The rating agency expects Irish debt/GDP to peak at around 120% in 2013-14.
It believes the modest Irish economic growth prospects are driven by the on-going fiscal consolidation process and the limited availability of private-sector credit.
Irish rating explained
The report is an annual update to the markets and the agency says does not constitute a rating action.
Moody’s uses 4 key factors to determine our sovereign debt rating — economic strength, institutional strength, government financial strength and susceptibility to event risk.
It says there are a number of key factors that support the Ba1 Irish rating.
Firstly it says our relatively predictable policy framework, commitment to fiscal consolidation and structural reforms, and its success in achieving all of objectives under the fiscal adjustment required by the EU-IMF programme account for an assessment of high institutional strength.
Secondly Moody’s highlights the competitiveness of the Irish economy, its business-friendly tax environment and labour-market flexibility.
Flexibility & Competitiveness
However it cautions that uncertainty remains over whether the economic environment with its demand-side weaknesses will allow the economy to leverage its strengths in terms of flexibility and competitiveness.
Moody’s also notes that Ireland has sufficient funding under the EU-IMF support package to cover its entire financing requirement until the end of 2013.
Moreover it notes that Ireland has made preliminary steps in an attempt to return to markets on a sustained basis from which we had been excluded since October 2010.
Newstalk’s business editor Ian Guider says Moody’s is also looking ahead to next year when the Irish bailout programme is due to end.
