In the summer of 2011 as Ireland grappled with arguably the worst banking crisis on the planet, ratings agency Moody’s cut the State’s debt rating to junk status, a symbolic final nail in the Celtic Tiger coffin.
At the time, Moody’s Investors Service said there was a “growing likelihood” that Ireland will need more bailout aid when the current one ended. They were dire times.
Fast forward 13 years and that same agency late last week upgraded Ireland’s credit outlook from stable to positive while maintaining the State’s Aa3 overall credit rating. The latter is three notches below Moody’s top Aaa rating.
The agency linked Ireland’s positive report card to two things. First, “the robust growth potential” of Irish economy. Most agencies are forecasting steady, if modest, growth of 2 to 3 per cent over the next two years as disinflation and rising wages boost consumer spending.
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Second, Moody’s said it took “into account the fact that Ireland is starting a gradual build-up of a fiscal buffer with the Government’s new long-term savings funds”.
The monster level of corporate tax receipts flowing into the exchequer from the multinational sector here is allowing the Government simultaneously pay down debt and put money aside (€4 billion a year) in a new sovereign wealth fund.
Ireland is one of the few European countries forecasting a big budget surplus this year. When most of our financial peers are trying to repair Covid-damaged budgets, the Department of Finance here is forecasting a healthy surplus of €8.6 billion for 2024.
Minister for Finance Jack Chambers latched onto Moody’s positive take, noting it reflected “the resilience of our economy and the commitment of this Government to a balanced and sustainable approach to budgetary policy”.
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