WASHINGTON: Ratings agency Fitch upgraded Ireland’s debt rating on Friday to “AA-” from “A+,” citing its economic recovery from the Covid-19 pandemic and increased revenue from business and income taxes.

While Ireland will continue to have a substantial debt burden, Fitch said it expects its debt-to-GDP ratio to decline through 2023 thanks to a new rule restraining the country’s spending.

“Fitch expects a continued improvement in Ireland’s fiscal metrics, supported by strong revenue performance,” the ratings agency said.

It had last upgraded the country’s debt in 2017 amid improving banking sector health following the eurozone debt crisis.

Corporate income taxes made up nearly 30 percent of the revenue growth, followed by value-added taxes, which brought in about 24 percent, and income taxes, which added more than 17 percent.

“These strong growth rates mostly reflect the performance of Ireland’s multinational enterprises... especially in the pharmaceutical and IT sectors, and the strong economic recovery from the pandemic,” Fitch said.

The agency noted positively that the government adopted a rule last year that permanent spending should not increase by more than five percent per-year, however it hasn’t been made law yet.

Fitch projected the restrained spending and increased revenues would help Ireland’s debt-to-GDP ratio drop below 50.2 percent by the end of 2023, about 25 percentage points below where it was in 2017.

While its debt relative to national income remained high at 104.7 percent, the agency expected it to decline to about 86 percent over the next two years.