Rating agency Standard & Poor's has cut the country's debt credit rating to BBB+. The move was not unexpected.
But the agency said that the outlook for the economy was more stable, due to its belief that the stress tests on the banks carried out by the Central Bank were 'credible', and the money which would need to be injected into the banks was within its expectations.
As a result, S&P has removed Ireland from what it calls 'creditwatch' status, meaning that a further downgrade is unlikely.
'We are of the opinion that the sharp contraction in Ireland's nominal GDP and gross national product since 2008 has reached an end, and that the Irish economy is now set to gradually recover,' S&P said, adding that Ireland had stronger growth prospects than Portugal or Greece.
The agency said the downgrade reflected its view that Ireland may need to borrow money from the new European Stability Mechanism, due to be introduced in 2013, under which those who lend money to Ireland could face losses.
S&P cut the credit ratings of Portugal and Greece earlier this week for the same reasons, sparking criticism from the European Commission.
S&P also said today that ti would soon assess the impact of its downgrade of Ireland on the ratings of the Irish banks.
Fitch to look at Irish rating
Another ratings agency, Fitch, has said it is also likely to lower Ireland's credit rating in the near future.
Fitch said it had placed Ireland's current BBB+ rating on what it calls 'credit watch negative', which means a downgrade is more likely.
The agency last lowered Ireland's rating in December, but it says it will now assess its view in the light of recent weaker than expected economic growth figures and the increased costs of recapitalising the banks.
