On 14 November, Fitch revised its outlook on Ireland from negative to stable. The country’s outlook was upgraded to reflect its “continued progress with its fiscal consolidation, external adjustment and economic recovery”.
The move was the rating agency’s first positive rating action on a peripheral eurozone member since the onset of the debt crisis.
However, a new statement from Fitch cautioned against interpreting this move as a sign that the challenges facing other troubled eurozone members has eased.
“The revision of the outlook on Ireland’s BBB+ sovereign rating to stable reflects country-specific considerations, rather than signalling a change in fortune for the eurozone periphery as a whole,” the ratings agency said.
Fitch pointed out that Ireland has made more progress in its fiscal adjustment programme than Greece or Portugal, the other countries to be bailed out by the international community.
This has helped Ireland to improve its competitiveness, increase flexibility in the labour market, support exports, boost growth and improve its current account.
In contrast, Portugal is suffering from contracting domestic demand and rising unemployment, the agency added. Greece, meanwhile, has seen its fiscal consolidation efforts “unravelled” by poor implementation and large falls in GDP.
Furthermore, the ratings agency pointed out that Spain still faces a “lengthy” adjustment process and has to implement deeper reforms to labour and product markets if growth potential is to be improved.
Fitch current rates Portugal at BB+ and Spain at BBB. Greece has a CCC rating, which reflects “substantial credit risk and the possibility of a default”.
