DUBLIN (Reuters) - Standard & Poor's raised Ireland's credit rating to 'A' on Friday, rewarding the former bailout recipient for what it said was solid economic growth, improving employment and a debt reduction path that stands out in the euro zone.
S&P became the first agency to strip Ireland of its prized AAA rating in March 2009 when the country's financial crisis took hold, but was also the first to put it back in the A band with an A- rating in June as economic prospects picked up.
Ireland's rating was upgraded by another notch to A with a stable outlook, placing it closer in S&P's opinion to AA-rated Belgium than Portugal, which followed Ireland into an EU/IMF bailout and is rated at BB by the New York-based agency.
"The upgrade reflects our view of Ireland's solid economic growth prospects, which we expect to underpin further improvements in the government's budgetary position," S&P said in a statement.
"The stable outlook balances our view that government finances have improved and that financial system asset quality is on the mend, against the prevailing downside risks associated with eurozone trading partners' uncertain growth prospects and the Irish government's still highly-leveraged balance sheet," it added.
Ireland is forecasting gross domestic product (GDP) growth of almost 5 percent this year, likely making it the fastest-growing economy in the euro zone. S&P said the economy should grow by an average of 3.7 percent over the next three years.
It forecast that unemployment would fall to a near 10-year low of around 9 percent by 2017 when the debt-to-GDP ratio would also drop to 91.4 percent, a pace that it said would stand out among high and static debt levels in most euro zone countries.
The performance of NAMA, Ireland's state-owned "bad bank", also impressed, as did the improving health of Ireland's lenders which nevertheless face an uneven return to profitability with credit levels set to fall until 2016.
Ireland's finance minister said the upgrade was particularly welcome ahead of meetings with potential investors on a state visit to China over the coming days.
"The return to investment grades across all of the main ratings agencies this year has reopened new markets to us across Asia," Michael Noonan said in a statement.
(Reporting by Padraic Halpin; Editing by Andrew Heavens)