Credit rating upgrade positive but caution needed - Noonan
Minister for Finance says change in Moody’s positon does not mean ‘mission accomplished’
A decision by Moody’s to lift Ireland’s credit rating to investment grade is a positive development but the State should not get ahead of itself, Minister for Finance Michael Noonan has said. Photograph: Scott Eells/Bloomberg
A decision by Moody’s to lift Ireland’s credit rating to investment grade is a positive development but the State should not get ahead of itself, Minister for Finance Michael Noonan has said.
Mr Noonan said the move by Moody’s, the last of the three main ratings agencies to improve its view on Ireland, would make Irish bonds a more attractive proposition for international investors.
“There will be more people willing to buy Irish bonds and more funds available and that should ensure that we get a better price in terms of lower interest rates,” he told RTE’s The Business programme.
Asked if the development would make the budget process easier or improve the State’s growth prospects, Mr Noonan replied that “everything helps but we shouldn’t lose the run of ourselves”.
He said there was “no feeling that it is mission accomplished” and that the Government would have to keep working “to restore the country to where we think it should be”.
The re-rating by Moody’s clears the way for more conservative investors, particularly in the Middle and Far East, to buy Irish Government debt.
Many of these funds are precluded from investing in Government debt if it does not have an investment grade rating from all three of the big credit rating agencies.
Taoiseach Enda Kenny held talks with a number of central banks and investment agencies in the Gulf region last week and Mr Noonan said the National Treasury Management Agency had been in talks with other potential investors.
Moody’s said the reasons for the upgrade were the growth potential of the economy and the Government’s exit from the EU-IMF bailout.
“The first driver of the upgrade is the recent acceleration of economic growth, which indicates an increased likelihood of securing the sustained long-term growth needed to achieve a turnaround in Ireland’s public finances. A key positive signal is the faster pace of employment creation, with the unemployment rate having dropped 2.7 percentage points from its Q2 2012 peak, despite a rise in the participation rate,” it said in a statement last night.
It also noted the Government’s ability to exit the bailout without a precautionary credit line, which it said “reflects that the government’s reform agenda stayed largely on track throughout the programme, despite weaker than expected domestic and external economic conditions”.
The Minister said events had almost passed out Moody’s previous view on Ireland - pointing to €13 billion being offered by investors at a rate of about 3.5 per cent to buy Irish bonds in a sale last week.
Moody’s also offered a positive outlook on Ireland, which was attributed to an expectation of a sustained recovery in the economy and signs of stronger growth coming through from the rest of Europe.
If the economy grows rapidly enough to put Ireland’s debt to GDP ration “on a firm downward path”, then a further upgrade is likely, it said.
Mr Noonan said the positive outlook was very important too as it suggested Moody’s may look at another upgrade for Ireland in the next 18 months.