S&P raises Spain's rating outlook

Ratings firm Standard & Poor's raised its outlook on Spain's sovereign credit rating to "positive" from "stable" on Friday, saying it believed the country's strong economic performance would continue over the next two years.

The US agency left its debt rating for the country unchanged at BBB+ but said it could raise it within the next 24 months "if economic performance and budgetary consolidation continue in line with our expectations," it said in a statement.

It predicts the Spanish economy, the euro zone's fourth largest, will grow by 2.5 percent in 2017 and by 2.1 percent in 2018 after expanding by 3.2 percent last year.

The growth will be fuelled by strong domestic demand as household consumption benefits from solid job creation and low interests rates, as well as from exports, which are being boosted by the weak euro and recent gains in competitiveness, the agency said.

Standard & Poor's said Prime Minister Mariano Rajoy's conservative government, which was sworn in for a second term in October without a majority in parliament, may not last its full mandate until 2020.

"We don't rule out early elections. But internal conflicts within the main opposition parties make such a scenario less likely in the near term," it said.

The last time Standard & Poor's raised its credit rating for Spain was in October 2015, when it increased it by one notch to BBB+, lauding labour market reforms that it said improved the country's economic prospects.