S&P Global Ratings on June 14 raised its long-term foreign and local currency sovereign credit ratings on Slovenia to AA- from A+, with a stable outlook.

It also upgraded the country's short-term foreign and local currency sovereign credit ratings to A-1+ from A-1.

The upgrades reflect the rating agency's expectation that Slovenia will continue to achieve solid economic and fiscal results, while also running substantial net external surpluses with the rest of the world.

S&P expects Slovenia's economy to expand 3.4% in real terms in 2019 before growth moderates to an average of slightly below 3% between 2020 and 2022. Domestic demand should be the key driver of economic growth in the coming years, the rating agency said.

However, uncertainties remain on external demand for Slovenian exports. As an example, S&P pointed toward the weakness in the German car manufacturing sector at the beginning of 2019, saying that it is of high relevance for Slovenia because of its high level of supply chain integration.

"Our ratings on Slovenia take into account the benefits from the country's eurozone membership and its strong external and fiscal performance," S&P said. "We also factor in high GDP per capita levels in an international comparison and the broad effectiveness of the institutional framework."

Although government debt has declined considerably during the past years, it still exceeds pre-2012 levels. According to S&P, "this could indicate less space to react if Slovenia was hit by a severe shock."

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.