Moody's raises outlook on Ireland for first time since 2017

The National Treasury Management Agency (NTMA) has welcomed a decision by the ratings agency Moody's to upgrade its outlook on Ireland to positive from stable.

The agency also affirmed its existing long-term debt rating for Ireland which currently stands at A2.

The NTMA said the outlook alteration is the first change from Moody’s in almost four years.

In September of 2017, the agency upgraded Ireland to A2 from A3.

"This is the latest in a series of favourable ratings actions relating to Ireland with the rating agencies noting the resilience of the economy in addressing the exceptional challenge of the pandemic and other risks," said Frank O’Connor, NTMA Director of Funding and Debt Management.

"The favourable trend in outlook and commentary from rating agencies is consistent with strong investor demand for Ireland’s debt over the past 12 months and continued positive feedback from our global investor base".

In its latest credit opinion, Moody’s said its view of Ireland reflects the strong growth and fiscal track record of the past few years and the resilience of the economy to recent shocks including Brexit and the pandemic.

"We expect the economic and fiscal trajectory to be resilient to lingering uncertainty surrounding the global corporate tax reform," Moody’s said.

"However, challenges will remain in the form of elevated high public debt levels and a relatively high degree of economic volatility."

The agency also said that despite the tax reform uncertainty, it believes that the Irish economy remains well-positioned to absorb the negative impact.

It also said it expects that debt improvements will resume from next year, while debt affordability will remain on "a positive trajectory".

Moody’s said it would consider upgrading Ireland’s rating if the economy demonstrates continued resilience in the face of external risks emanating from the UK-EU trading relationship and international corporate tax reform.

"Greater clarity that the debt burden will continue to fall steadily over the coming 1-2 years would also support upward pressure on the rating," it said.

It said a downgrade seems unlikely, but it would likely return the outlook to stable if the course of fiscal policy changed, resulting in debt stabilising at higher levels.

"Although not our core scenario, a material adverse impact of global corporate tax reform, post-Brexit trading arrangements or other external shocks on Ireland’s growth and fiscal performance over a multiyear period would also exert negative pressures on the rating," it said.

The move by Moody's follows last month’s decision by DBRS MorningStar to change the trend on Ireland’s rating to 'Positive’ from 'Stable’.

While in May, Scope Ratings changed its rating of Irish debt to AA- from A+.

The latest development comes a day ahead of a planned €750m Treasury Bill auction by the NTMA.

So far this year the NTMA has raised €14.75bn in long-term bond funding, of an expected range of €18-20bn that it plans to raise.