S&P Global Ratings on Dec. 16 revised its outlook on Slovenia to positive from stable and affirmed the country's long- and short-term foreign- and local-currency sovereign credit ratings at A/A-1.

The outlook revision reflects S&P's expectation that the recovery of the Slovenian economy will continue at a solid pace. The rating agency expects the economy to grow about 2.5% in 2016 and 2.7% the following year.

S&P said the Slovenian banking sector returned to profitability in 2015 after a protracted banking crisis and now appears well capitalized, with the average capital adequacy ratio standing at 21.4% at September-end, up 0.5 percentage points from 2015-end. While it expects the monetary and credit transmission mechanism to the real economy as hampered due to the recent banking crisis, the agency expects banking sector activities and monetary conditions to continue to normalize in 2017.

The positive outlook reflects a one-in-three chance that S&P would raise Slovenia's ratings over the next two years if it sees further improvements in Slovenia's transmission of monetary policy and budgetary position, coupled with a decline in general government debt.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.