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The upgrade comes after the London-based rating agency downgraded Slovenia's outlook from stable to negative at the end of June, citing political instability ahead of the early general elections in the country as the reason.

Standard & Poor's said in the latest assessment, published on Friday, that the appointment of the new coalition government reduced the political risk and brought a better environment for economic growth, according a press release from the the Finance Ministry.

The stable outlook reflects the expectations of the rating agency that the government of Miro Cerar will continue with fiscal consolidation, restructuring of the banking sector and implementation of structural reforms and privatisation of state-owned companies, the ministry said.

Standard & Poor's warned that a deteriorating economic outlook, a departure from fiscal consolidation and instability of the government coalition resulting in less predictable economic policies would probably lead to a change in Slovenia's credit rating.

The rating agency meanwhile improved its economic growth projection for Slovenia for the 2014-2016 period from 0.9% to 1.5%.

According to Standard & Poor's, the revision reflects the stronger performance of net exports (mainly of ICT and electrical equipment) and rising civil engineering construction (mainly EU-funded
municipal infrastructure projects).

Despite Slovenia's recovery becoming broader, prospects for economic growth are considered to remain weak without further structural reforms, the agency said, adding that investing in Slovenia is currently slow and costly.

Standard & Poor's forecasts Slovenia's gross general government debt to rise by 13 percentage points to 83.4% of GDP in 2014, peak at 83.7% of GDP in 2015 and decline to about 80% by 2017.