Ireland’s credit rating goes up a notch thanks to healthy economy

Kroll cites falling debt burden, strong banking sector and political stability for AA- rating

Debt ratings agency Kroll Bond Rating Agency (KBRA) has upgraded its rating on Ireland’s creditworthiness by one level to AA- on the back of the State’s falling debt burden and strengthening of the banking sector.

The move follows on from a similar upgrade by the more influential Standard & Poor's ratings firm in November. The new grade is four levels below both agencies' top-notch AAA rating.

"Principal credit concerns for Ireland have been international tax reform and Brexit, the latter considering Ireland's exposure to the United Kingdom economy," said Kroll analysts, including Dublin-based Alan Madden, in a report issued on Friday.

“Ireland’s robust economic performance and policy environment underpin its enhanced resiliency to shocks.”


Growth forecast

Minister for Finance Paschal Donohoe moved on Thursday to upgrade his growth forecast for the Irish economy for 2020 to 3.9 per cent and to an average of 3 per cent a year for the period up to 2025, to take account of the extension to the Brexit timeline and on the assumption that a free trade deal between the EU and UK is negotiated successfully.

Ireland's attractiveness as an investment destination also reflects a stable legal and regulatory regime

However, he warned the State could lose up to €2 billion of its corporation tax revenue under new proposals to reform the global tax system. This would remove roughly one-fifth of corporation tax receipts, based on last year’s figures.

“International efforts to harmonise the global tax environment could damage Ireland’s comparative advantage underpinned in part by its corporate tax rate,” said Kroll.

“KBRA also notes that Ireland’s attractiveness as an investment destination also reflects a stable legal and regulatory regime, political and policy stability, a well-educated workforce and ease of access to EU markets in addition to its favourable corporate tax rate.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times