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Moody’s: Banking sector weak, expecting growth of 3.8pc this year

FISCAL policy is being loosed “significantly” by the Government meaning debt will probably fall at a slower pace than expected, Moody’s has warned.

The credit ratings giant said the economy was recovering at a reasonably strong rate, but constraints include the high levels of public debt and weaknesses in the banking sector.

It warned that the strong investment performance underway here will require a pick-up in bank lending, yet it points out that the banking sector remains weak.

Kathrin Muehlbronner, senior credit officer at Moody’s, said the economic performance was strong last year with growth estimated at about 5pc.

“However, we believe that the strong growth in exports is unlikely to be repeated as it was partly due to special factors related to offshore production activity,” Ms Muelbronner said, echoing the comments from the Central Bank also this morning.

Moody’s said it expects growth rates of 3.8pc this year and 3pc in 2016.

It said risks from the banking sector to the government’s balance sheet have been reduced, and that government finances will benefit from the savings on interest spending from the deal done to repay the IMF loans early.

“However, the ratings agency notes that fiscal policy in 2015 is being loosened significantly compared with earlier commitments from the Government,” Moody’s said.

“As such, the 2015 Budget means that Ireland’s elevated debt levels will likely reduce at a slower pace than initially expected.”

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