The Standard & Poors agency has cut Spain's credit rating Thursday two notches, saying the outlook is negative.

In reducing the country's sovereign debt rating from “A” to “BBB+,” S&P cited what is calls the risk that Spain's debt could expand while the economy shrinks.

The financial rating agency predicted that the Spanish economy will contract 1.5% this year after previously forecasting a slight growth.

S&P says falling personal incomes, less investment by businesses, and cuts in government spending to balance the national budget are dragging down the Spanish economy.