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Moody's: Ireland has turned the corner

Tuesday, March 25 16:34:47

Moody's Investors Service senior analyst Kristin Lindow today told the Wall Street Journal there is no doubt that Ireland's economy has turned the corner.

He signalled that the rating firm is positive that the country will manage its huge debt levels in the coming years.

Ireland exited its three-year bailout with the European Union and International Monetary Fund in December, and the Irish government cited Moody's decision in January to lift its junk rating on Ireland's government bonds as an important step in the country's progress out of its long banking debt crisis. The government also said the sale of E1 billion in 10-year debt in early March to investors at a yield of under 2.97pc was evidence that investors had growing confidence that the country is emerging from its economic ills.

But hard evidence on Ireland's recovery remains unclear. While official data last month had shown employment growing at the end of 2013 at the fastest pace since before the start of Ireland's huge banking debt crisis in 2008, the Central Statistics Office this month reported the Irish economy had contracted sharply in the fourth quarter. It meant that after growing in both 2011 and 2012, the economy had contracted again in 2013, by 0.3pc.

However, in an interview with The Wall Street Journal, Ms. Lindow said the much-improved employment numbers and other survey evidence meant that "the corner has turned on economic activity" and Moody's projects the Irish economy will grow strongly this year. "GDP notwithstanding, all the indicators that matter as far as Ireland's domestic economy is concerned reflect that upturn. And it is certainly not a jobless recovery," she said.

Moody's in January lifted Ireland's government debt rating from junk to Baa 3, the lowest investment-grade rung, but with a positive outlook. Analysts say a decision on whether to increase its rating again at its next review on Ireland scheduled for May 16 will be closely watched.

Ms. Lindow said that because the Irish authorities hold a lot of cash, Ireland's "position is substantially better" than its gross debt level of about 123pc of gross domestic product suggests. A net debt position of about 100pc of GDP helps make Ireland's debts "affordable and manageable," as the country recovers in the coming years, she said.

Ms. Lindow said that the outlook for Ireland and other peripheral euro-area nations had improved significantly. "We expect to see positive momentum. We are seeing positive momentum. That backdrop is important," she told the Wall Street Journal.