Ireland’s credit rating raised despite expectations of giveaway budget

Ireland’s “strong” public finances and potential for growth have been cited by a European ratings agency as it upgraded the State’s credit rating by one notch.
Scope Ratings upgraded Ireland to an AA rating from an AA- rating and changed Ireland’s outlook to “stable”.
Investors use ratings agency standings to guide decisions on where to put their money, so an upgrade in Ireland’s rating should help to hold down the cost of raising new debt.
Scope’s move follows a decision by Moody’s late last week to upgrade 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.
Moody’s linked Ireland’s positive report card to the “robust growth potential” of the 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.
Scope said “strong public finances and robust economic growth” were the driving force behind its upgrade.
However, it warned investors of the State’s “high reliance” on multinational corporations as well as the “exposure to global shocks” as a small, open, and financially interconnected economy.
“The upgrade of Ireland’s long-term ratings reflects the strong outlook for its public finances, including continued general government surpluses and a falling debt-to-GNI ratio over the medium term,” it said.
The agency noted that Ireland’s economic growth has “proven resilient during recent crises” and said it is “expected to remain robust over coming years”.
Scope said it expected Ireland’s general budget balance to remain “in surplus over the coming years, reflecting continued sizable windfall corporate income tax receipts”.
“These have increased sharply since the pandemic, more than doubling from €10.9 billion (18 per cent of government revenues) in 2019 to €23.8 billion (27 per cent of government revenues) in 2023.
“Growth in corporate tax revenue has remained strong during the first half of 2024 and is up more than 15 per cent compared with the same period in 2023.”
The Government is strongly fancied to deliver a generous budget next month ahead of a general election that must be called no later than March. Taxpayers are in line for significant income tax and USC cuts, while social welfare increases of at least €12 per week are also on the table.
Minister for Finance Jack Chambers said Scope’s upgrade was “another strong indicator of the strength and resilience of our economy following another positive rating report earlier this month”.
“As I stated previously, these positive ratings reflect this Government’s commitment to a sustainable approach to budgetary policy while continuing to invest in our public services and providing support to households,” he added.
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 is forecasting a surplus of €8.6 billion for 2024.