Fitch Ratings on Thursday downgraded Ireland three notches from A+ to BBB+, with a stable outlook, citing higher fiscal costs of restructuring and supporting the banking system after the country received international economic assistance last month.
The credit rating agency said the downgrade was spurred by weak growth prospects and the loss of affordable funding in the market, as well as greater uncertainty about the Irish economy due to the deepening financial crisis.
"The scale and pace of the deterioration of public finances, continuing contingent fiscal and macro-financial risks emanating from the banking sector, combined with the highly uncertain economic outlook and loss of market access, means that Ireland's sovereign credit profile is no longer consistent with a high investment grade rating," Dow Jones Newswires quoted the report.
Fitch added that Ireland's continued investment-grade status -- three notches above speculative grade -- is due to support from the European Union and International Monetary Fund, "as well as the Irish government's demonstrated commitment to fiscal consolidation and still strong underlying economic fundamentals."
Under the EU-IMF bailout, Irish banks will receive as much as 35 billion euros of additional capital. Also, Ireland's government this week unveiled its budget for 2011, the first step in a four-year plan to lower its deficit to the EU's limit of 3% of gross domestic product.
The other two major ratings agencies, Moody's Investors Service and Standard and Poor's, also have negative outlooks on Ireland and will likely downgrade the country at the end of their review periods.
Fitch's stable outlook is because "The rebalancing of the Irish economy is well underway," the report said. The downgrade still leaves Ireland's credit rating above that of Greece.