Rating agency Fitch has restored an A- ratings agency to Irish sovereign debt, citing an improved trend in the economy.

In a significant pre-Budget boost to the Government, the agency this evening raised Ireland’s credit rating by one notch to an A- from BBB+. Fitch said the Republic had retained “many of its structural strengths” throughout the economic crisis.

“It is a wealthy, flexible economy,” Fitch said, also noting that “vulnerabilities” in the banking sector had declined.

The agency said its outlook for the rating was stable, meaning it does not see significant clouds on the economic horizon.

Fitch warned though that this view could change in the event of fiscal targets being missed, or the banks needing further “significant” recapitalisation.

The upgrade came as Ireland’s borrowing costs hit a new record low today with yields on 10-year bonds falling below 2 per cent for the first time, putting the State’s borrowing costs below that of the US and the UK.

Yields on Irish debt have fallen steadily since mid-2011, at the height of the euro zone debt crisis, when ten-year yields topped 14 per cent.

Minister for Finance Michael Noonan welcomed today’s upgrade, saying it reflected “the significant progress that has been made in growing the economy, creating jobs, repairing the banking sector and improving our public finance”.

“Ireland’s economic recovery is creating jobs and the benefits of the employment led recovery to individual households and the broader economy has been recognised by Fitch in their upgrade,” said Mr Noonan.