Growth is projected to accelerate to 1.4% in 2015 and 1.7% the year later, revised figures released by the central bank on Tuesday show. The projection for 2015 has been left unchanged.

The upgrade is underpinned by favourable international conditions, higher-than-expected growth in the final quarter of 2013, and improved business and consumer sentiment, according to Aleš Delakorda, the head of the central bank's analytics department.

Exports have been picking up since mid-2013 and indicators for 2014 indicate a continuation of the favourable trend.

Domestic demand is expected to contract by 0.6% this year, but this is still a 2.4 percentage point improvement on the central bank's earlier forecast.

Likewise, gross capital formation is to expand by 0.6%, accelerating to 1.7% next year and 2.9% in 2016. However, government spending is expected to contract for at least three more years, according to Delakorda.

Unemployment will continue to hover at around 10% while wages are to rise in real terms given the low inflation, which is projected at 0.5% this year, rising to 1.3% by 2016.

Delakorda warned that the recovery remained precarious and said the government would have to find the right balance, in particular by refraining from excessive austerity.

Vice-governor Janez Fabijan meanwhile warned against political instability, as the economy is only starting to recover.

He said it was urgent that companies continued to deleverage and restructure, while the business environment needs to improve and open up to foreign capital.

The central bank's predictions are even more upbeat than those of the government's economic think-tank IMAD, which last month upgraded its forecast for the year to 0.5% growth, to be followed by an increase of 0.7% in 2015 and 1.3% in 2016.