S&P downgrades Russia credit rating to junk

Standard & Poor's rating agency has 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.

S&P had warned in late December that it could deprive Russia of its investment-grade credit rating as soon as mid-January, following a rapid deterioration of the country's monetary flexibility.

S&P said in a statement that external and fiscal buffers were likely to deteriorate due to rising external pressure and increased government support to the Russian economy.

The downgrade marks the first time in more than 10 years that Russian sovereign debt has been rated below investment grade, in what some call 'junk' territory.

The move will push up Russia's borrowing costs as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade.

Russia's economy is expected to slide into recession this year, as Western sanctions over Ukraine spur capital flight and inflation, and an enduring slump in oil prices sharply depresses Russia's export revenues.

Wire services