Growth in Slovenia has gathered pace as faster expansion in export markets has coincided with higher consumer spending and investments, the OECD says in its latest report.

But it expects growth to moderate in 2018 and 2019, though remaining above potential.

"Private consumption and housing investment will be supported by continued employment gains and faster real wage growth ... Growth of exports, and imports of intermediary inputs, should ease as external competitiveness deteriorates due to the intensification of labour market tensions."

According to the OECD, the fiscal stance is broadly neutral, with the budget deficit narrowing for cyclical reasons. "Fiscal policy may have to be tightened to contain inflationary pressures. Greater privatisation efforts would reduce the debt-to-GDP ratio in anticipation of future ageing-related spending, while also helping to fund measures to boost inclusiveness, productivity and competitiveness."

Although the country's financial system has picked up after the 2013 banking crisis, the low interest-rate environment poses risks to banks' future stability by reducing their scope to boost interest margins, the OECD believes.

In addition, banks' greater reliance on short-term funding to finance long-term fixed-rate loans poses a risk to profitability if interest rates should rise.

In its September economic survey of Slovenia, the OECD said that the country had made a considerable improvement over the past two years, while recommending that it should ensure fiscal sustainability, rise to the challenges of population ageing and increase productivity.

It is the latest among several Slovenian and international institutions to notably upgrade the economic forecast for Slovenia for this year. The European Bank for Reconstruction and Development has upgraded its by 1.5 percentage points to 4%, while improving the forecast for next year by 0.7 points to 2.9%.

The International Monetary Fund revised it from 3% to 4%, while expecting the economic growth to slow down to 2.5% next year.

IMAD, the government's macroeconomic forecaster, expects the economy to expand by 4.4% this year, up 0.8 points from its spring forecast, and by 3.9% next year, which is up 0.7 points from the spring forecast.

The European Commission expects the Slovenian economy to expand by 4.7% this year and by 4% in 2018.