Credit ratings agency Fitch has become the latest firm to strip Ireland of its top AAA credit rating.

Fitch cut the country's triple A rating by one level to AA+ last night, the second highest, citing a severe economic downturn taking a 'heavy toll' on public finances.

Fitch also said it holds a negative outlook for Ireland, suggesting more cuts may come. 'The outlook for Ireland's public finances and fiscal risks is no longer consistent with an 'AAA' rating,' it said.

The downgrade from Fitch, following a similar move by Standard & Poor's last week, will raise the cost of borrowing additional funds overseas.

Fitch said that Ireland's GDP is expected to decline by 8% in 2009, and Government revenues may fall by 16%, following similar declines in 2008.

The yield on Irish 10-year bonds rose to 5.35% compared with 5.31% yesteday.

Fitch has also downgraded AIB and Bank of Ireland’s long-term issuer default ratings from A to A-.

The two banks also had their support rating floors revised from A to A-. AIB's individual rating of D and BoI’s rating of C/D have also been place on ratings watch negative.

In a statement, Fitch said it felt that the institutions’ losses this year could rise when certain properties are transferred to the National Asset Management Agency at a discount.

Meanwhile, French credit rating agency Coface yesterday downgraded the ratings or the ratings' outlook on 47 countries, including Ireland, Britain, France and Germany in light of the global crisis.

It said it downgraded Germany's rating from A1 to A2, along with those of France, Belgium and Norway. Ireland was downgraded to A3 from A2, along with Spain, Greece, the UK and Portugal.