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Fitch affirms Irish BBB credit rating

Friday, February 21 10:12:18

Global ratings agency, Fitch, today affirmed Ireland's credit rating at 'BBB+' with Stable Outlook saying that the country is on the path to recovery but that our debt burden remains heavy.

It said that the affirmation reflects the following factors: Ireland successfully completed its three-year bailout programme in December 2013.

All quarterly fiscal targets of the Troika (EU, ECB, IMF) programme have been met, underpinned by strong policy commitment, it added.

"Parallel with fiscal consolidation, Ireland has returned to market financing and has built up cash buffers equivalent of 13pc of GDP by end-January 2014, including E3.75bn from a 10-year bond sale in January 2014."

Fitch forecasts a budget deficit of 4.8pc of GDP in 2014, implying a balanced primary position, compared with a primary deficit of more than 9pc of GDP in 2009 excluding bank recapitalisation.

Nevertheless a further E2bn of consolidation will be needed next year to reach a budget deficit below 3pc of GDP, the precondition to exit the EU's Excessive Deficit Procedure (EDP), it said.

But Ireland's gross general government debt/GDP ratio may have reached around 124pc in 2013, one of the highest among Fitch-rated sovereigns.

"The combination of high debt and modest medium-term growth potential implies that keeping debt on a declining path will require large primary surpluses for an extended period."

The acceleration of economic growth and larger than expected fall in unemployment in the second half of last year are signs of a broad-based recovery, it said.

"GDP growth could reach 1.6pc in 2014 and 2.2pc in 2015 as growth contribution from domestic demand will turn positive after five years of balance-sheet recession in the private sector. Fitch expects the current account surplus to remain around 4pc of GDP in 2014-15, similar to 2013. Post-crisis vulnerabilities remain in the banking sector, notwithstanding the improvement in economic conditions and the authorities' efforts to accelerate mortgage resolution. Ireland has retained many of its structural strengths throughout the crisis. It is a wealthy, flexible economy and its per capita gross national income was USD35,100 in 2013, more than twice the 'BBB' median."