Lower unemployment makes government finances recover quicker.

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Swedish central government finances will recover somewhat more quickly as the labour market downturn will be less sharp than expected, the Debt Office said in a statement Wednesday, and new forecast smaller budget deficits this and next year than the previous estimate.

The budget deficit is estimated at 53 billion kronor ($7.5 billion) in 2010 and 37 billion kronor in 2011; a reduction of 11 billion kronor and 4 billion kronor.

The change in the 2010 forecast is mainly explained by lower unemployment than previously expected, leading to higher revenue from wage- and consumption-based taxes. At the same time, unemployment insurance payments will be lower.

"The downturn in the labour market will not be quite as sharp as we expected in October. We have therefore reduced our forecast of unemployment slightly. We still expect an increase in 2010 compared with 2009, but next year unemployment will decrease", Håkan Carlsson, analyst at the Dept Office said in the statement.

The authority now estimates the economy to grow 2.5 percent this year and just below 3 percent 2011.

The current surpluses in the fourth quarter in Sweden fell 26 percent to 40.8 billion kronor (4.2 billion euros, 5.7 billion dollars) from the third quarter, the central statistics office said. In annual terms the contraction came to 42 percent.

The current account is a broad picture of a country's foreign trade, measuring trade in goods and services and certain financial transactions.