Ratings agency, Morningstar DBRS, has upgraded Ireland’s credit rating.
The agency has bumped the long-term foreign and local currency issuer ratings to AA, from AA (low).
It has also changed the outlook on the ratings to stable from positive.
Morningstar DBRS said the move reflects Morningstar DBRS’ assessment that the improvement in public finances will continue in the medium term.
It also based its decision on the creation by the Government of two long-term savings funds which it said should help manage windfall revenues.
“Public debt metrics are expected to continue to improve driven by the combination of large primary surpluses, strong nominal economic growth, and a low effective interest rate,” it added.
It also pointed to Ireland’s credit ratings being underpinned by the institutional strength, strong fiscal performance, and favourable public debt dynamics.
“Furthermore, Ireland’s robust trade and investment flows, flexible labour market, young and educated workforce, and its access to the European internal market also support its credit ratings,” it said.
“These features strengthen the economy’s competitiveness and its medium-term growth prospects.
However, it added that the country’s debt to GNI* remains elevated given our small and open economy.
“Moreover, the benefits to the economy from large multinational enterprises domiciled in Ireland come with some concentration risks and economic volatility, which, if not properly managed, could translate into fiscal vulnerabilities,” it stated.
The move is the first upgrade from Morningstar DBRS since January 2022 and the sixth upgrade from credit rating agencies in the past 18 months.
“This upgrade from Morningstar DBRS is another welcome development as it reflects Ireland’s continued strong economic performance and is consistent with international investor sentiment,” said Dave McEvoy, Director of Funding and Debt Management at the NTMA.
“Today’s upgrade is underpinned by a range of factors including the improvement in Ireland’s fiscal position, as well as a favourable debt structure.”
Minister for Finance, Jack Chambers, welcomed the decision, saying it is a recognition of the fundamental strength of the Irish economy.
“However, we know that the very positive headline figures mask underlying risks that we must be cognisant of,” he said.
“The fiscal position remains heavily exposed to volatile ‘windfall’ corporate tax revenues paid by just a small number of highly profitable firms which is why the establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund is such a positive and important development”.