Growth : Ireland remains the fastest-growing euro area country - on course for around 4.5% growth this year . Q1 GDP increased 6.5% y/y and 1.4% q/q (released on Thursday). The 2014 growth figures were also revised up, with GDP growth up to 5.2% and GNP increasing 6.9% y/y (see details). Leading indicators remain upbeat with service PMIs hovering at a nine-year high as we enter H2.
Deficit : The general government deficit is headed towards 2.0% of GDP for 2015 according to the H1 budget data. Strong economic growth implies that Ireland is on course for the fifth year in a row with fiscal outperformance . The government's original target for this year was a deficit of 2.7%.
Debt : The Department of Finance is forecasting debt to GDP will drop to 100% next year. We expect it to drop below 100% of GDP when the bank re-privatisation is conducted , possibly as soon as Q4 this year, but most likely in Q1 2016. FM Noonan recently said that he sees debt falling `just below' 100% in 2016 and even Moody's lowered its debt profile equivalently this week.
Rating : Most importantly, the upgrade by Moody's to 'A level' on 11 September should be a done dea l, and it is even possible that Moody's will lift Ireland two notches this time. Since the last review date in May, Moody's has lifted the rating range three notches to A3-A1 (on 24 June) and this week went even further with a 'credit positive' on the back of the strong growth figures. Note that the current Baa1 is not even within Moody's current rating range and is keeping some investors out. Fitch will review Ireland on Friday 7 August . An upgrade by Fitch to 'A' would still be one notch below S&P.
Issuance : Ireland has only EUR1-4bn in issuance remaining with EUR11bn done YtD out of this year's target of EUR12-15bn. Recently the NTMA said that the next syndicated bond sale is likely to be in 2016 and that Ireland will only tap existing bonds this year. Furthermore, the NTMA communicated that Ireland is unlikely to start pre-funding 2016 this year.
Market pricing : The IRISH curve has performed strongly in the past month. The 5Y is testing new lows vs peer Belgium while the 10Y still has a bit further to go before lows are tested. We think the Irish outperformance has further to go.
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