LONDON (AP) - Standard & Poor's rating agency on Monday downgraded Russia's credit grade by one notch to junk status, citing a weakened economic outlook.
The agency dropped the rating to BB+ from BBB- as it sees the country's financial buffers at risk amid a slide in the country's currency and weakening revenue from oil exports.
Russia's economy has been hit hard by the double impact of weaker prices for its energy exports as well as Western sanctions.
The Russian currency tumbled on the downgrade, dropping some 7 percent to about 68.5 rubles to the dollar.
Standard & Poor's said that Russia's financial system is weakening, limiting room for maneuver for Russia's Central Bank. It said the bank "faces increasingly difficult monetary policy decisions," while also trying to preserve incentives for growth.
The Russian economy is expected to contract by 4-5 percent this year for the first time since President Vladimir Putin took the helm.
Capital outflows, which averaged $57 billion annually during 2009 to 2013, soared to $152 billion last year.
"Stresses could mount for Rus