Ratings agency Moody’s upgraded its economic forecasts for Ireland to 5 per cent on Tuesday, up from 4 per cent previously, as it said that investment from the multinational sector is driving growth. While the agency did not indicate a ratings upgrade, it also said that Ireland’s public debt ratio is set to fall to 90 per cent in 2016, down from a high of 120 per cent in 2013.

While Moody’s pointed to investment from the multinational sector as a key driver of growth, it noted that the recovery “has become increasingly broad-based” and was also supported by domestic demand during 2015, which it deemed to be credit positive.

“We expect strong growth to continue this year as employment continues to increase,” Moody’s said, noting that it is forecasting growth of 4 per cent for 2016.

Debt

Moody’s also said that it expects the public debt ratio, which is a percentage of government debt to GDP, to fall to less than 90 per cent in 2016, down from 94.5 per cent in 2015, and down from its prior forecast of 93.6 per cent, as of November 2015.

" Our expectations for the debt ratio are now generally five or six percentage points of GDP lower than just a few months ago," Moodys said. Ireland's public debt ratio was 123 per cent as recently as 2013, and Kathrin Muehlbronner, lead analyst for Ireland, says the Irish public debt ratio is falling at one of the fastest rates in Europe. In Portugal for example, the public debt ratio is still of the order of 128 per cent.

However, Moody’s said that Ireland’s debt remains a credit challenge, and reducing it, from the “still very high” level, will require a continuation of fiscal consolidation through the electoral cycle.

And, an upgrade would likely necessitate a further reduction at a “rapid pace” in the public debt ratio.

“Evidence of the authorities’ continued commitment to a strong pace of fiscal consolidation would also be positive for the rating,” Moody’s said. Conversely, a downgrade could be possible if the next government were to pursue “a materially different fiscal policy, putting at risk the downward trend in the debt ratio”.

Following the recent election Moody’s said that the inconclusive result was unlikely to prompt any material change in Irish fiscal policy.