NEW YORK, Jan 11 (Reuters) - Standard & Poor’s on Friday affirmed Ireland’s BBB-plus sovereign credit rating, citing strong progress in stabilizing its fiscal position, but noting risks from its high debt burden and challenges complying with its fiscal reform program.
The rating remains with a negative outlook, the firm said in a statement.
S&P said Ireland’s government has shown a commitment to cleaning up its public finance balance sheet.
Still, the rating agency cited Ireland’s “still-substantial fiscal deficits, heavy public and private debt burdens, and its weak financial system that collectively undermine growth prospects as well as its capacity to respond to large economic and financial shocks.”
“While we expect Ireland’s economy to benefit from its openness and flexibility, we continue to see considerable downside risks surrounding the sustainability of recoveries in its key trading partners,” S&P said.
Earlier on Friday, S&P’s head of European sovereign analysis said he expected the country to retain its investment grade rating during 2013.
“The flexibility of society and of markets in Ireland is probably more pronounced than in other countries in the periphery,” Moritz Kraemer, the analyst, said. “The risks are still to the downside, a lot of it emanating from the banking sector which is still challenged very severely.”
Dublin unveiled its sixth austerity budget in little over four years last month, piling 3.5 billion euros ($4.6 billion) of tax hikes and spending cuts on a long-suffering public. Consumer sentiment plunged in December from November.
S&P said it expects economic growth to increase by 1.2 percent in 2013 and to average 2.5 percent over the 2014-2016 period.
Moody’s Investors Service rates Ireland at Ba1, junk status with a negative outlook. Fitch Ratings has Ireland at BBB-plus with a stable outlook. S&P and Fitch hold Ireland three notches above junk level.