Brexit and volatile growth main risks to Ireland, Moody’s says

Brexit and Ireland’s “volatile” growth are among the main risks facing the country as the ratings outlook for European nations is currently as “good as it gets”, more than a decade after the financial crash, according to a Moody’s analyst.

Speaking at a conference organised by Moody's in Dublin on Tuesday, the firm's lead analyst for Ireland and the UK, Sarah Carlson, said its "base case" is that a no-deal Brexit will be avoided. She spoke in advance of the UK parliament's scheduled vote later in the day on prime minister Theresa May's EU withdrawal agreement.

Moody’s expects that a no-deal Brexit would deliver a 4 per cent hit to UK gross domestic product (GDP) over the long term, as well as a knock-on impact to Ireland, its closest trading partner.

The agency estimates that Ireland’s GDP growth rate will ease to about 4 per cent from 7.5 per cent last year, but that it still faces some overheating risks.

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“The economic fundamentals of Ireland are very robust,” Ms Carlson said, adding that the Republic’s creditworthiness is underpinned by its “strong” growth prospects over the medium to long term, as well as “significant improvements” in Government finances in recent years.

Still, the volatile nature of the State’s GDP means that fiscal buffers are required, she said.

Moody’s, which was alone among the main credit ratings firms in downgrading its stance on Ireland’s debt to “junk” during the financial crisis, currently has an A2 grade and “stable” outlook on the Republic. This remains five levels below its top-notch Aaa rating.

Moody’s currently only has “stable” and “positive” outlooks on its ratings for all euro-zone countries. It marks the first time since 2007 that the firm has not had a single “negative” outlook for members of the single currency.

“It’s kind of as good as it gets with regards to growth and the general credit outlook in Europe,” Ms Carlson said.