Fitch Ratings has revised its outlook for Ireland’s sovereign debt rating from negative to stable, while affirming the country’s BBB+.
According to Fitch, the affirmation and revision of the outlook “reflects Ireland’s continued progress with its fiscal consolidation, external adjustment and economic recovery, as well as the sovereign’s improved financing options”.
The ratings agency claims fiscal consolidation “remains on track, broadly in line” with the European Union-International Monetary Fund programme, which aims for a 120 per cent debt/GDP ratio in 2012.
“So far, Ireland has met all the quarterly fiscal targets of the programme,” it reports. “Fitch expects the 2012 deficit to be close to the target of 8.6 per cent of GDP, implying a primary deficit of 4.5 per cent, despite some expenditure overruns.”
The agency also notes an improvement in competitiveness and an improvement in its current account surplus.
It adds: “Although Fitch forecasts GDP growth at 0 per cent in 2012, down from 1.4 per cent in 2011, this would still be better than the eurozone average, which Fitch forecasts at -0.5 per cent, and significantly better than other so-called peripheral eurozone countries, highlighting Ireland’s progress towards returning to economic growth.”
Fitch warns the rating faces downside risks from high public and private debt levels, ongoing vulnerabilities in the financial sector and Ireland’s sensitivity to external demand and financial conditions.
It adds that the economic slowdown and “adverse financing conditions” have increased some vulnerabilities in the financial sector.