The projection for 2016 was upgraded to 2% from 1.7% and the growth outlook for 2017 set at 2.1%, IMAD said on Thursday.

Exports will remain the engine of growth, as they are projected to grow 5.6% this year and 6.2% in 2016. Import growth is expected to trail exports by about a percentage point.

Contributing importantly in trade is the improvement in economic conditions in Slovenia's main trade partners and the eurozone as a whole.

"We are getting positive signs about economic activity in Slovenia's main trade partners," IMAD director Boštjan Vasle told the press.

Moreover, private consumption, which barely budged last year, is expected to accelerate to 1.1% this year and 1.6% thereafter. Government spending will continue to drop, inching 0.4% lower in both years.

Vasle pointed to increased stability in the banking sector, which IMAD expects will translate into increased lending to business over the next few quarters.

The positive trends for the Slovenian economy are expected to continue, as labour costs will continue to rise slower than in most other countries.

"This was one of the main factors which resulted in the economy performing better last year than in the years before that," said Vasle.

Despite a broadly positive outlook, the IMAD boss warned that mid-term growth prospects were heavily dependent on reforms.

"Without additional, even deeper, measures we cannot expect the growth rate from last year to persist in the mid-term," said Vasle.

Growth in gross capital formations this year will remain at last year's levels of around 4.8%, slowing down to 2.8% in 2016. This was due to the transition in EU fund phasing from the expired EU financial perspective to the current period.

Unemployment is forecast by IMAD to continue dropping in the next 20 months, falling to 12.5% this year and 12% next year, after ending 2014 at 13.1%.

One of the main risk factors for the coming years will be the adverse demographic trends, as part of which the number of work able persons will drop by 56,000. This will have an important impact on the labour market and public finances, said Vasle.