Ireland: R&I Affirms A+/a-1, Stable

NEWS RELEASE

Jan 25, 2021

R&I Affirms A+/a-1, Stable: Ireland

Rating and Investment Information, Inc. (R&I) has announced the following:

ISSUER: Ireland

Foreign Currency Issuer Rating: A+, Affirmed

Rating Outlook: Stable

Domestic Currency Issuer Rating: A+, Affirmed

Rating Outlook: Stable

Foreign Currency Short-term Debts: a-1, Affirmed

Domestic Currency Short-term Debts: a-1, Affirmed

RATIONALE:

With the trade agreement between the U.K. and the European Union (EU) in place, Ireland's economy has avoided the shock. Its economic fundamentals, underpinned by the cluster of high value-added industries of multinational enterprises, are strong, so the economy is expected to return to its pre- pandemic growth track as the novel coronavirus pandemic subsides. Since the Irish government maintains policy that emphasizes discipline, it is likely to advance fiscal consolidation from 2022 onward. In light of these views, R&I has affirmed the Foreign and Domestic Currency Issuer Ratings at A+.

The real gross domestic product (GDP) in 2020 is likely to log positive growth, buoyed mainly by exports of pharmaceuticals and IT-related equipment by multinationals. Domestic demand, on the other hand, has seen a steep decline due to the pandemic and restrictions on going out. Partly because lockdowns resumed, the unemployment rate reached a high level at 20% as of end-2020, including workers receiving coronavirus-related jobless benefit. The government expected economic growth of 1.7% for 2021, under a scenario that the U.K. and EU would transition to trade based on the World Trade Organization rules. The Economic and Social Research Institute (ESRI) presents a more upbeat projection -- growth of 4.9% -- as the trade between the two markets would be tariff-free. Since Ireland has close economic ties with the U.K., it will likely be affected by non-tariff barriers such as customs requirements. R&I keeps an eye on the coronavirus infection and economic trends.

Major banks have until now expanded their capital and further stabilized funding mainly through deposits in an effort to improve the asset quality. The series of efforts on soundness have paid off, providing the banking sector with a certain risk resilience. Policy measures such as fiscal stimulus packages to support households and non-financial corporations and easing of capital requirements have also contributed to the resilience. The outcome of stress tests by the Irish central bank suggested that banks have enough capital to absorb the shock even under a severe scenario. Thus there is a low likelihood of the stability of the financial system being undermined.

Due mainly to spending on the coronavirus measures, the fiscal balance is expected to be in a deficit of 5.4% of GDP in 2020. It represented a deficit of about 9% of the gross national income (GNI) adjusted for the effects of multinationals' activities and other factors. The government compiled a budget for 2021 in anticipation of continued expenditures on the coronavirus measures and changes in the trade rules between the U.K. and the EU. It expects a budget deficit similar to the size a year earlier. Now that the U.K. and the EU have agreed on a trade deal, the worst-case scenario has been avoided. The Irish government's conservative policies, including the use of the Recovery Fund as the reserves, creates leeway in its fiscal stimulus measures.

According to the government, the outstanding general government debt for 2020 would swell to 62.6% of GDP, a low level compared with other EU member states. This is attributable primarily to the fact that it

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Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,

please refer to https://www.r-i.co.jp/en/docs/policy/site.html.

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NEWS RELEASE

is measured against GDP, which is influenced by multinationals' activities, and Ireland's debt to revenue ratio is larger than the average for the EU. The debt ratio is expected to start falling in 2022 or beyond. The government has strived to improve the fiscal balance and lower the debt ratio, while pursuing conservative policies such as lessening the structural risk that its fiscal position entails and securing reserves with the shock from Brexit in mind. Given the policy management that the government has taken so far, R&I believes that fiscal soundness can be restored alongside a domestic economic rebound.

The primary rating methodology applied to this rating is provided at "R&I's Analytical Approach to Sovereigns". The methodology is available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating.

https://www.r-i.co.jp/en/rating/about/rating_method.html

R&I RATINGS:
ISSUER:	Ireland
	Foreign Currency Issuer Rating
RATING:	A+, Affirmed
RATING OUTLOOK:	Stable
	Domestic Currency Issuer Rating
RATING:	A+, Affirmed
RATING OUTLOOK:	Stable
	Foreign Currency Short-term Debts
RATING:	a-1, Affirmed

	Domestic Currency Short-term Debts
RATING:	a-1, Affirmed

■Contact	: Sales and Marketing Division, Customer Service Dept.	TEL.+81-(0)[e-mail]
■Media Contact	: Corporate Planning Division (Public Relations)	TEL.[phone]
Rating and Investment Information, Inc.	TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,

please refer to https://www.r-i.co.jp/en/docs/policy/site.html.

© Rating and Investment Information, Inc.