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Fitch may change outlook but no upgrade likely, analysts say

A LOT has happened since Fitch last updated Ireland’s credit rating in early October.

Budget 2014, an assessment of bank balance sheets and a little thing called the bailout exit have all concluded since then.

So while investors and analysts eagerly awaiting Fitch’s latest update on Ireland’s credit-worthiness aren’t expecting miracles, they will be surprised if the ratings agency doesn’t budge at least a little bit.

Fitch currently rates Ireland’s credit worthiness as ‘BBB+’, three notches above sub-investment grade status, with a ‘stable’ outlook. Most experts don’t expect this rating to change when Fitch issues its latest update on Friday, but agree that the country’s ratings outlook will most likely be moved to ‘positive’. A ‘positive’ outlook indicates that an upgrade can be expected in the medium term.

The update is due just a month after Moodys, the most influential of the international credit rating agencies, raised its rating for Ireland to investment grade. Its decision followed months of lobbying by the Government.

“I think there’s a good chance of, not a ratings upgrade, but a ratings outlook change to positive,” said Goodbody Stockbrokers’ chief economist Dermot O’Leary.

“Fitch’s last update was in October.

“Since then there’s been a stream of good newsflow – we’ve had a bank balance sheet assessment where everything looked reasonably okay; and Budget 2014, which committed to tough deficit targets.”

He doesn’t expect a ratings upgrade until next year at the earliest.

“We’re absolutely expecting a move to a ‘positive’ outlook,” said Cantor Fitzgerald’s senior bond trader Ryan McGrath.

“Fitch have had us on ‘stable’ since November 2012. A huge amount has happened since then.”

Mr Mcgrath predicts a full-blown ratings upgrade could happen as early as this year.

“The next step up is ‘A-‘. Psychologically this would be a huge step,” he said.

In its October update, Fitch said that sustained economic growth might trigger an upgrade.


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