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Fitch Lowers Ireland's Ratings, Outlook Stable 15 days ago
(RTTNews) - Fitch Ratings on Wednesday downgraded Ireland's long-term foreign and local currency Issuer Default Rating to 'AA minus' from 'AA plus', with the outlook remaining stable.
"Fitch has downgraded Ireland's sovereign ratings to reflect the severity of the decline in nominal GDP and the exceptional rise in government liabilities," Chris Pryce, Director in Fitch's Sovereign Group said.
"The rating downgrade partly reflects the severity of the economic adjustment underway, entailing a far greater actual and expected decline in nominal GDP, about 9% in 2009 and a cumulative 14% between 2007 and 2010, compared with other high grade sovereigns", the firm pointed out.
Fitch said pressures from private sector de-leveraging is likely to be more severe in Ireland than advanced economies, reflecting falling wages and rising unemployment, high household debt, further falls in house prices and subdued lending by banks. Moreover, it expects continued weakness in domestic economy to cause tax revenues to fall by EUR 2 billion this year compared to budgetary forecasts made in April. Fitch expects the fiscal deficit to hit 12.5% of GDP in 2009 and remain at 12% in 2010.
At the same time, Pryce noted that the vigor of the government's fiscal consolidation response to date, the expectation of further aggressive budget tightening and the likely success of the National Asset Management Agency (NAMA) would help rehabilitate the banking sector. All these factors have helped stabilize the outlook for Ireland's creditworthiness, he added.
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