A European rating agency has acknowledged Ireland’s robust public finances and its potential for economic growth, increasing the country’s credit score from AA- to AA. Scope Ratings have deemed Ireland’s financial outlook as “stable”, a decision that will guide investors and potentially lower the costs of generating new debt for the country.
This comes in the wake of Moody’s recent decision to retain the nation’s Aa3 overall credit score while advancing its credit outlook from stable to a optimistic one. Despite being three levels lower than Moody’s highest possible rating (Aaa), this improvement is anchored in the “substantial growth potential” of Ireland’s economic environment.
Various agencies look forward to an ongoing, yet measured, progression of 2-3% in the following two years due to a rise in consumer expenditure spurred by disinflation and increased wages.
Scope Ratings ascribed the rating uplift to robust economic growth and strong public finances that Ireland has demonstrated. Nevertheless, investors were alerted regarding the country’s substantial dependence on multinational firms and susceptibility to international shocks. These factors are due to Ireland’s position as a fairly small, globally-connected, and open economy.
Scope Ratings shared, “The elevation of Ireland’s long-term ratings echoes the positive forecast of its public finances, featuring sustained overall government surpluses and a declining debt-to-GNI ratio over an intermediate-term span.”
The firm also commented on Ireland’s resilient economic expansion amidst recent crises and expressed its expectations of the country’s robustness persisting in the coming years. It anticipates the country’s overall budget balance to remain in surplus in the ensuing years, boosted by substantial, unanticipated corporate income tax receipts.
The agency observed that these receipts experienced a significant surge during the pandemic, escalating from €10.9 billion (accounting for 18% of governmental earnings) in 2019 to an estimated €23.8 billion (27% of government revenues) in 2023.
In the initial segment of 2024, corporate tax income has been robust, showing over a 15 per cent increase when pitted against the equivalent period in 2023. The anticipation is high for the government to present an ample budget in the subsequent month preceeding the mandatory general election that must be held by March at the latest. Notable reductions in income tax and USC are expected, paired with a potential boost in social benefits of at least €12 per week.
Finance Minister Jack Chambers affirmed that the upgrade by Scope signals the vigour and robustness of our economy, further fortified by an additional positive rating report released at the beginning of the month. As he has remarked before, these favorable ratings are a manifestation of the government’s adherence to a sustainable budgetary policy, while still prioritising investment in public services and providing assistance to households.
Ireland sets itself apart as one of the scarce European nations expected to yield a significant budgetary surplus this year. While the majority of financial counterparts are occupied with mending budgets strained by Covid, predictions from the Department of Finance indicate a surplus of €8.6 billion for the year 2024.