The latest assessment of the Irish economy and State’s financial standing by rating agency Moody’s tells us little we don’t already know.
Along with most of the industrialised world, the economy here is headed for a contraction of around 10 per cent (8.5 per cent in this case) as a result of the shock triggered by coronavirus, while the Government’s budget deficit is likely to breach €30 billion this year after a small surplus last year.
In Ireland’s case, the shock is mitigated by the giant multinational sector and the pharma and IT sectors, which have proved more resilient than other parts of the economy. And as with all assessments of the Irish economy, caveats about potential backward steps from Brexit and global tax reform abound.
That said, the report’s primary aim is to rate the economy and the sovereign for international investors. And on that score, we are given a strong thumbs-up.
"Our credit view of Ireland reflects the strong growth and fiscal track record of the past few years and our expectation that the positive trends will resume after the economic shock triggered by the coronavirus outbreak has faded," it said, while noting the State's A2 credit rating, which allows us to borrow at extremely low rates, is stable for the time being.
It discounts the possibility of an upgrade, however, in light of the Covid-19 downturn and, perhaps more significantly, until we get a better sight of the post-Brexit arrangement.
Judging from the tortured nature of negotiations between London and Brussels, it's unlikely this cloud cover will lift anytime soon.
What the Moody’s report tells us is that international markets are, for the moment, seeing coronavirus as a force majeure – one that is universal and unavoidable – and therefore not a reflection of the underlying health of the Irish economy.
The big question globally is, how long will markets and investors continue to hold this position with debt levels soaring and no sign of the virus-led disruption abating?
