Job seekers line up in the the spring to get into the Working Abroad Expo in Dublin. Fitch Ratings said it did not expect Ireland’s economy to grow this year, but it probably wouldn’t contract either.Laura Hutton
Fitch Ratings Ltd. raised its outlook for Ireland's sovereign debt rating on Wednesday, citing the government's success in cutting the budget without slowing economic growth and its return to borrowing from international bond markets.
The rating agency left Ireland's rating at triple-B-plus, three notches above junk status, but upgraded its outlook to "stable" from "negative." Moody's Investor's Service Inc. is the only one of the three main rating agencies to have downgraded the country to non-investment grade.
"The affirmation and revision of the outlooks to stable from negative reflects Ireland's continued progress with its fiscal consolidation, external adjustment and economic recovery, as well as the sovereign's improved financing options," the agency said in a statement.
"Fitch judges that the risks surrounding the adjustment path have narrowed and become more balanced."
Fitch said it expected the government to meet its fiscal targets for the year and welcomed a strong improvement in competitiveness.
But it said the country retains downside risks from its high public and private debt levels and the economy's sensitivity to fluctuations in external demand.
The Irish debt agency, the National Treasury Management Agency, welcomed the Fitch announcement as "encouraging."
Ireland this year became the first bailed-out euro country to make a successful return to borrowing on financial markets, enabling it to slice around €10-billion ($13-billion) off its post-bailout funding requirements.
It has passed all of its reviews by its European Union and International Monetary Fund lenders and says it is on track to meet its fiscal targets this year and avoid a second bailout when its current program runs out at the end of 2013.
Fitch said it did not expect Ireland's economy to grow this year, but said zero-per-cent GDP growth would be better than the 0.5-per-cent contraction it expected across the euro zone as a whole.
"It is important that one of the three [rating agencies] has put in some type of positive move. It is good to see Ireland's hard work rewarded," said Owen Callan, senior dealer at Danske Markets, a primary dealer in Irish bonds.
"It will get investors who haven't necessarily returned to the Irish story taking a look at it again," Mr. Callan said. "We should see yield [spreads] slightly tighter tomorrow morning."