Moody's upgrades Ireland's rating to A2, citing continued 5% growth rate, and rates Ireland's "Institutional Strength" as “Very High”
September 15th: Moody's upgrade of Ireland's rating to A2, also changes outlook to 'stable from positive'. It cites Brexit as the main downside, but says "Ireland's financial sector stands to benefit from Brexit, with a number of large financial firms announcing relocation plans of some operations to Ireland in the past several months".
The report, compiled by Moody's sovereign rating team led by Kathrin Muehlbrunner, says that "against expectations,sterling weakness has not had a discernible effect on Irish exports, although this may still materialize. Ireland’s financial sector stands to benefit from Brexit, with a number of large financial firms announcing relocation plans of some operations to Ireland in the past several months."
 


The narrownesss of the corporate tax base, the plans of the US administraion to introduce corporate tax reform, with US President Trump targeting a 15% tax rate for the US, are factors contributing to the risk profile for Ireland's global business model of a small open economy. The EU Commission's continued advocacy of a CCCTB concept, despite the opposition of Ireland, East European countries and other member states in the EU 27, to it.

The report says: "Ireland is also more exposed than most peers to potential shifts in global taxation rules, given that its low corporate tax regime has been instrumental in attracting many multinational companies to its territory. Ireland's exposure is particularly large with regards to the United States, given that many of the Ireland-registered companies originate from the US".

Of Moody's four fundamental rating factors, Ireland scores even higher than its growth capacity on "Institutional Strength" grounds, where it is accorded a "Very High" rating in the report. This compares with just a "High" rating on the overall economy.

This is striking as it contrasts with widespread perceptions, particularly within Ireland, a short number of years ago that Ireland's institutional rating was poor in the context with its handing of the global financial crisis and in particular its handling of the housing credit boom in the years before that.

Says the report: "We assess Ireland's institutional strength as “Very High”. This reflects the improvements in banking supervision and regulation since the crisis, both by the Irish regulatory authorities and through the implementation of the Single Supervisory Mechanism (SSM) at the ECB. In addition, Ireland scores very highly in the key quantitative Worldwide Governance indicators that we use in our methodology. The country's robust institutions and transparent policy framework allowed policymakers to effectively address the crisis through successive administrations, which is another factor underpinning the “Very High” score.