Unemployment will fall below 10 per cent next year as the Republic’s economy continues growing, according to a multinational agency that rates countries’ creditworthiness.

Ratings agency Fitch confirmed the Republic's A- rating yesterday, essentially saying there is only a very low risk the State will not repay its debts. Its move means global banks are likely to cut the interest they charge on future government borrowings.

Fitch analyst Gergely Kiss bases the rating on the Republic's improving economy, which he says has the potential to grow at about 2 per cent a-year. He predicts growth will reach 2.9 per cent this year and 2.5 per cent next year.

“Unemployment is forecast to decline close to 10 per cent during this year and reach 9.6 per cent in 2016,” Mr Kiss adds.

Mr Kiss points out that falling unemployment, increased private investment and stabilised household consumption all confirmed the domestic economy had turned a corner. But he warns the need to cut debt and low inflation could continue to limit growth in domestic demand.BARRY O’HALLORAN