Increased tax revenue and lower expenditure for unemployment boost Sweden’s central government finances.

• Swedish exporters face troubled times ahead
• Broad improvement of the Swedish economy

Swedish central government finances are approaching balance already this year, as the economy recovers more quickly than expected, the Debt Office said Wednesday.

The reduced deficit is mainly explained by increased tax revenue. At the same time, unemployment benefit disbursements are expected to be lower.

“There are clear indications that the economic recovery has strengthened. Many businesses have reported rising demand while unemployment has increased less than expected”, the Dept Office said in a statement. “However, the macroeconomic assessment is more uncertain than usual, since it is difficult to assess the further development of the debt crisis in Europe”.

The Scandinavian country was hard-hit by the global economic crisis but its economy quickly bounced back. The country's GDP increased by 3 percent in the first quarter compared to the first quarter of 2009; considerably stronger than expected.

The International Monetary Fund (IMF) said that Sweden has weathered the global downturn relatively well and applauded the Riksbank and the government, pointing out that "aggressive stabilisation policies" had offset the impact of the global financial crisis.

The Debt Office's new forecast indicates a budget deficit of 14 billion kronor ($1.75 billion) in 2010 and 8 billion kronor in 2011. This is a reduction of 39 billion kronor and 28 billion kronor compared with the previous forecast.

The smaller deficits lead to a reduction in central government borrowing. Excluding on-lending, the budget is practically balanced.