HELSINKI (AFP) - The Finnish government presented its 2011 budget proposal Thursday, showing an improved outlook for the country's battered economy but also forecasting that public debt would continue to rise.

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"Driven by traditional export demand and private consumer demand, the Finnish economy is returning to a growth track after the winter slowdown," the finance ministry said in a statement presenting the new budget proposal.

Finland -- the only Nordic member of the eurozone -- was especially hard-hit by the global financial crisis and saw its economy contract nearly eight percent last year and fell back into recession in the first quarter of 2010.

But recent indicators show the economy is on the rebound and on Thursday the government hiked its economic growth forecast for this year to 2.0 percent from its previously improved estimate of 1.5 percent.

It also raised its forecast for gross domestic product (GDP) growth next year to 3.0 percent from the 2.5 percent it predicted at the end of June.

But despite Finland's return to growth, the finance ministry cautioned that "the general government deficit will continue to widen because the impacts of the turnaround will take some time to filter through."

The government deficit this year will tick in at 3.3 percent of GDP, it said, adding that the situation should improve next year when that deficit was expected to be 1.4 percent of GDP.

The public debt to GDP ratio would also continue to rise due to central and local government borrowing, and in 2011 the ratio would exceed 50 percent, the statement said.

"Even though the public debt ratio in Finland is still relatively low by EU standards, the rate at which debt is growing does give cause for concern," stressed the finance ministry, which over the past year has repeatedly called for drastic cuts to rein in the country's debt.

On a more positive note, the ministry pointed out that unemployment had not risen as steeply during the latest crisis as during previous recessions in the country, pointing out that the jobless rate should stabilise at 8.6 percent this year and slip to 8.2 percent in 2011.

Inflation was meanwhile forecast at about 1.5 percent this year and about 2.5 percent next year, "due to rising import prices and ... more buoyant economic activity both domestically and internationally."

In all, the government's budget proposal called for spending of 50.3 billion euros (64.7 billion dollars) next year, which is about four percent lower than what has been budgeted for 2010.

The budget deficit in 2011 was meanwhile expected to stand at 8.3 billion euros, down from 13.3 billion this year.