Global Finance Case

Ireland’s Economic Risk

Ireland’s economy used to be known among international investors for its strong economic growth between 1995 and 2007. However, when the global financial crisis struck back in 2008 the country soon became one of the five countries involved in the PIIGS acronym which refers to the five Eurozone nations that became significantly weaker after the crisis. Their economy has been slowly recovering since, but it hasn’t been able to reach the growth rates before the economic collapse.

Over the past year, Irelands risk has gotten slightly better. Their long term Moody rating went from Ba1 to a Baa3 last year. This brought their credit rating from negative to stable because Moody believes that “government debt will level off relative to gross domestic product.” (Reuters, 2013) This increase in their rating shows that Ireland only offers adequate financial security and they may still be unreliable over time because of lack of certain protective elements. The S&P outlook also moved from stable to positive last year showing that Ireland investment risk is getting better and it has improved within the past year.

The reason Ireland’s rating is improving is because they are finally starting to recover from the economic collapse. They are having some really good progress in restoring the government’s financial solvency which is bringing about growth and they continue to go through a fiscal consolidation. Ireland instituted a plan to consolidate their debt by 2015. They have been cutting public spending by 10 billion euros and raised value added taxes by 5 billion euros. By cutting their spending and raising money with this VAT their goal is to bring their deficit back to a normal level by 2015, which would be why their ratings continue to improve. Another reason their outlook is good is because they have very favorable corporate tax rates. With a very low corporate tax rate of 12.5%, Ireland has been