Standard & Poor's upgraded its outlook on Ireland's credit rating to positive from stable on Friday saying the government may beat its fiscal targets and cut its debt faster than expected.
The move comes six months ahead of the country's planned exit from its EU/IMF bailout, which will require a full return to borrowing on bond markets. It will also be a boost to sentiment after data last month showed Ireland had unexpectedly tipped into recession for the first time in four years.
S&P maintained its BBB-plus rating, leaving Moody's as the only major rating agency that rates Irish sovereign debt as non- investment grade.
"The outlook revision reflects our view that Ireland's general government debt burden is likely to decline more rapidly, as a percentage of GDP, than we had previously expected," S&P said in a statement.
"This is due to sustained budgetary consolidation, stabilizing domestic demand, and higher receipts from government asset sales."
It said it saw a more than one-in-three probability it would raise Ireland's credit rating during the next two years.
S&P said it expects Ireland's national debt to peak at 122 percent of GDP in 2013 but decline to 112 percent by 2016.
Standard & Poor's had the country on negative outlook until February, when Dublin struck a long-awaited deal with the European Central Bank allowing it to convert promissory notes into long-term bonds. The deal effectively gave Dublin far longer to repay debts it ran up in rescuing the Irish banking system.