Ratings agency, S&P Global Ratings, has affirmed Ireland's sovereign debt rating.

It has also maintained the outlook at stable following a scheduled review.

The assessment is a vote of confidence in the state at a time when the economy is coming under huge pressure due to the Covid-19 pandemic.

It should help ensure that Ireland’s cost of borrowing remains low over the coming months.

In its report, the agency says the Covid-19 pandemic will drive a sharp recession in Ireland this year, after the country posted one of the strongest growth rates among advanced economies over recent years.

But it says the Government has introduced a comprehensive policy response to safeguard incomes and shield businesses from a temporary-but-severe liquidity shock.

It also points to the sizeable monetary supports on offer from the European Central Bank, as well as high income levels here, the diversified and open economy, the educated and flexible workforce and health demographics.

These factors, coupled with Ireland's productive human and physical capital, and flexible labor and product market regulations, alongside its membership in the EU, position the economy well for a strong recovery in 2021-2022, S&P says.

However, the agency says it acknowledges considerable uncertainty around the timing of that resurgence.

It says the decision to maintain the outlook at stable reflects its view that the adverse economic and budgetary impact of the COVID-19 pandemic will be contained without lasting and structural damage to credit metrics. 

The agency warns the ratings could come under downward pressure though if the economic downturn persists longer than expected and damages long-term productive capacity.

Another risk, it claims is if the fiscal consolidation starting next year proves to be significantly slower than it anticipates.

It says an unexpected reversal of the European Central Bank's policy support could also weigh on the rating. 

The ratings are also constrained by Ireland’s high public debt, elevated external leverage, and the outsized statistical effects in national and external accounts, it says.

However, on the upside the rating could improve if Ireland's fiscal performance and external position strengthened significantly beyond its current projections it states.

This could happen if for example a stronger economic recovery than expected takes place.