One of the largest rating agencies has upgraded its outlook for the State’s debt from stable to positive, citing “the favourable budget position” and a speedy decline in Government debt as a percentage of gross domestic product (GDP). The agency has also affirmed its overall Irish rating at AA-.
“The Irish economy is in a strong cyclical position, underpinned by a tight labour market and record low unemployment rate in particular,” Fitch said in a commentary accompanying the rating decision.
The agency highlighted the swing from a €6.8 billion Irish deficit in 2021 to an €8 billion surplus in 2022, predicting that the surplus this year would run close to €10 billion and above €12 billion in 2023 and 2024.
Fitch also noted that public debt fell from 58.4 per cent of GDP in 2020 to 44.7 per cent last year and said it expected this “firm declining trend” to continue over the coming five years. It said a ratio below 40 per cent is possible next year.
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The agency acknowledged the “inflated” contribution of the multinational sector to GDP and the risk that this sector and the ‘limited’ benefits it brings to the economy could shrink sharply in the context of, for example, OECD tax agreements. It also drew attention to the housing market, judging that “housing supply is estimated to be below medium-term requirements and is currently constrained by labour and material shortages”.
