Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Ireland (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AA-/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 4 October 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Ireland’s AA- ratings reflect several credit strengths, including its: i) wealthy, diversified and competitive economy that generates one of the highest per-capita incomes in Scope’s rated universe and robust growth potential; ii) track record of fiscal discipline pre-crisis and expected return to fiscal surpluses in the medium term, alongside a long maturity of public debt, significant official sector ownership of government debt as well as low borrowing rates; iii) well-established institutional framework and ability to attract significant foreign direct investment; and iv) European Union and euro-area membership within a large common market, a strong reserve currency and access to regional lenders of last resort for banks via the European Central Bank and the sovereign via the European Stability Mechanism.

Despite these credit strengths, challenges to Ireland’s ratings remain, including: i) still high public and private debt levels when assessed against underlying economic activity; ii) strong dependence on multinational corporations whose corporate tax contributions make up a significant, growing portion of government revenues; and iii) the economy’s vulnerability to sudden international shocks in the context of a small and very open economy.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The AA-/Stable ratings/Outlooks could be upgraded if, individually or collectively: i) public debt relative to modified gross national income remains on a clear and sustained downward trajectory; ii) the robust growth outlook is maintained over the forecast horizon; and/or iii) private sector debt continues to fall significantly.

Conversely, the ratings/Outlooks could be downgraded if: i) Ireland’s growth potential proves substantially weaker than anticipated, for example, due to shifts in international corporate taxation policies; ii) fiscal discipline weakens significantly, resulting in an increasing general government debt ratio over the medium term; and/or iii) private-sector and financial system risks increase significantly, impacting longer-term macro-economic and financial stability.

For the updated rating report accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Rating Methedology, 8 October 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eiko Sievert, Director.

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