S&P 'positive' on outlook for Ireland, could upgrade

20th December 2013, Comments 0 comments

Ratings agency Standard and Poor's took an upbeat view of Ireland on Friday, saying the country could be heading for an upgrade if it maintains progress out of bailout funding.

Ireland, nearly bankrupted by a banking and debt crisis, received its last slice of bailout funding last week and is now emerging from a European Union-International Monetary Fund rescue programme.

S&P said: "We believe Ireland will continue to reduce its general government debt burden through budgetary consolidation and asset sales, as the domestic economy improves, allowing it to exit the EU/IMF program and maintain access to capital markets."

The agency maintained its "BBB+/A-2" long- and short-term foreign and local currency sovereign credit ratings.

"The outlook remains positive, reflecting our view that there is a more than one-in-three probability that we could raise our long-term ratings on Ireland in the next 18 months," S&P said.

Improving business and consumer confidence should "spur economic growth to close to or slightly above 2.0 percent, which we see as Ireland's sustainable trend growth rate," the agency said.

The country was helped by favourable demographics, the openness of the economy, and flexibility in labour and product markets.

But since exports amounted to more than all gross domestic product, the economy would "remain sensitive to demand from key trading partners" which were Britain, the United States and the rest of Europe.

The country was also helped by "strong consensus" for reforms among the leading political parties, but remained vulnerable to external financing risks.

And the banking sector "still has very high levels of non-performing loans, at over 25 percent of the domestic loan book and rising," the agency said.

It expected that banks would now move quickly to deal with long-term arrears under targets set by the central bank and this would lead to some foreclosures of loans for buy-to-let properties.

© 2013 AFP

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