BELFAST, Northern Ireland - Standard and Poor's raised its outlook on Ireland and forecast Friday that the bailed-out country's debt levels could improve more quickly than expected as the export-focused economy recovers and government income grows.
The ratings agency kept its risk grade on Irish debt securities at BBB+ but improved its outlook from stable to positive, suggesting a possible rating hike that would drive down Irish borrowing costs. S
Moody's, in stark contrast, has graded Ireland's debt securities as Ba1 junk bonds and kept the country on negative outlook. Fitch, like S
And it cited the possibility that Ireland's state-run "bad bank," which is responsible for handling the toxic debt of six rescued Irish banks, could prove unexpectedly successful in selling off its mammoth portfolio of half-built housing developments, shopping malls and derelict development land. The National Asset Management Agency has sold off assets conservatively over the past three years due to Ireland's shell-shocked property market, where prices are stabilizing at roughly half of their peak 2007 levels.
Ireland had been the only bailout recipient, alongside Portugal and Greece, to achieve growth despite an aggressive four-year austerity program that has cut the average paycheque by more than 15 per cent. Economists credit Ireland's performance chiefly to its use of low tax rates to attract foreign multinationals, including 700 U.S. companies that employ around 7 per cent of the labour force and generate around a quarter of Ireland's entire economic output.
Ireland plans a further 3.1 billion euros ($4 billion) in tax hikes and cuts as it seeks to resume normal borrowing this year, when it is scheduled to become the first of the original three bailout countries to exit its bailout program.
The Irish treasury already has resumed limited successful debt auctions, including 10-year bonds, in anticipation of the EU-IMF funds drying up this year.