Moody's Says Ireland On Course

DUBLIN--Ireland is on course to emerge on schedule from its international bailout this year, but the fragility of its economic recovery continues to weigh on prospects for an improvement in its credit worthiness, Moody's Investors Service's lead analyst for the country said.

The European Union released forecasts Friday that showed Ireland continues to recover from its deep banking debt crisis, but at a very slow pace.

In an interview with The Wall Street Journal, Kristin Lindow, the new lead analyst for Ireland at Moody's, said that though she noted Ireland's "excellent compliance" to its bailout that leaves the country on course to emerge from its program this year, the ratings firm's negative outlook reflects the country's weak economic growth, weak banking system, high debts and the risk that the country's export-led recovery could still be hobbled by slackening world demand for its exports.

Analysts are watching closely for any signs of change in Moody's assessment of Ireland's prospects because some potential investors are precluded from buying Irish sovereign bonds while the ratings firm maintains its noninvestment grade on the country's debt.

Any upgrade by Moody's could potentially lead to a further significant lowering of Ireland's borrowing, as it continues to re-engage with markets for the first time in almost three years, experts say.

Ms. Lindow cautioned that Ireland's economic and financial concerns continue to weigh on the outlook.

"Right now, the economy has been expanding but at a very slow pace for the last two years," she said.

The prospects for Ireland's securing an early deal on lengthening its bailout loans will likely be dimmed by the fact that Europe's leaders will move slowly to reach any agreement ahead of important elections looming later this year, she said.

The EU, with the International Monetary Fund and the European Central Bank, together comprise the troika of lenders that provided Ireland with a 67.5 billion euro ($89 billion) loans deal in late 2010. The Irish government needs the economy to grow to help it emerge from its worst banking debt crisis and to help it to secure full access to capital markets from 2014.

In its latest forecasts Friday, the EU said the Irish economy will grow by 1.1% this year, unchanged from the rate it projected last November, and expand by 2.2% in 2014, also unchanged from the growth rate it projected previously. However, it increased its estimate for 2012 growth to 0.7% from the 0.4% rate it had forecast.

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