Ireland's fiscal prospects seem "better than expected", and the country could see its rating return to investment grade this year, Citi analysts said today.

The research note cited the deal struck on the promissory notes and economic growth performing better than expected for the optimism on the economy.

However, analysts also warned there were "wide uncertainties" over the outlook, mainly due to the vulnerability of the economy to factors such as external growth, and the possibility of having to cover the costs of Nama-related losses in the future.

The report said another year of "modest but positive" real gross domestic product growth was forecast for Ireland, with the deficit due to drop to 7 per cent of GDP in 2013 before declining the following year to 4 per cent.

"We expect that Ireland will get a conditionality-light ECCL plan after the Troika programme ends in late 2013, hence opening the door to the ECB’s OMT facility," Citi analysts wrote in the note.

"With external backstops and assuming that official creditors will remain flexible if Ireland meets Troika targets, we no longer expect sovereign debt restructuring involving privately-held sovereign debt (ie PSI) in coming years, although this will remain a risk if the economy nose dives or Ireland slips from the Troika plans."

However, the report said evidence of growth was still "somewhat patchy", and warned the economy was still facing some powerful domestic headwinds and was vulnerable to external uncertainties due to exchange rate swings and external growth.