With Ireland’s elections being held on February 26th, Fitch’s raising of the credit rating was an unexpected boost to the coalition’s campaign.
Rating agencies ordinarily hold off upgrading a debt rating until after elections. This ensures that policy change does not impact upon their rating.
Citing Ireland’s improved economic performance and steady improvements in the public finances, Fitch upgraded the rating from A- to A with a stable outlook and predicted further employment growth. Ireland’s unemployment rate fell to 8.6 per cent earlier in the week.
The National Treasury Management Agency welcomed the upgrade, stating that it reflected the positive trajectory of Ireland’s debt dynamic and expanding economy – factors underscoring the healthy demand the NTMA is seeing for Irish debt issuance.
Ireland’s election debate is focused on the country’s economic recovery. Ireland’s Taoiseach, Enda Kenny, is campaigning on the strength of the economy and is keen to focus on predictions that Ireland will be Europe’s best-performing economy for the third successive year in 2016.
This has raised criticism from Sinn Fein leader Gerry Adams and industry leaders, bringing to the debate the fact that many people are not feeling the recovery and questioning the success of the economic turnaround.
Gerry Adams has also accused the three major parties of miscalculating the amount of money available to the next government. This follows Fitch’s prediction that the medium-term growth potential of the economy is around 2.0 to 2.5 per cent. Kenny’s Fine Gael have based spending plans on a 3.5 per cent average annual rate.
It would appear that for individuals who are concerned about their levels of debt, economic recovery is not a certainty and wages may not be set to rise. These individuals would do well to seek specialist debt advice such as debt solutions through Carrington Dean. Predictions that interest rates will rise from the current historic low of 0.5 per cent will only serve to increase the number of people in mortgage arrears.
Opinion polls show Fine Gael well ahead but slipping after this less than ideal start to their campaign. As the opinion polls stand, Kenny’s party and its coalition partner Labour will be unable to secure a majority.
Fitch cited a protracted period of political uncertainty as a potential risk. The lack of an alternative coalition calls into question Ireland’s economic stability.