"In an international perspective, Swedish finances appear strong".

Sweden's Finance Minister Anders Borg.

• Sweden climbs in 'doing business' ranking
• Sweden hikes repo rate as economy speeds up

The Swedish debt office on Tuesday vastly improved its forecast for the Scandinavian country's finances, saying Sweden will nearly balance its budget this year and should see a surplus in 2011.

"The Swedish economy appears to be stronger than in our previous forecast (in June), in particular in 2010. The recovery in Sweden has been stronger than in the euro area and the United States," said the National Debt Office, which is the government's financial manager.

Sweden is now expected to post a budget deficit of just five billion kronor (534 million euors, 726 million dollars) this year, down from the previous forecast of a 14-billion-kronor deficit, the debt office said in a statement.

"The budget is thus almost balanced. This strong development continues in 2011 and 2012 when the forecast indicates a central government budget surplus of 18 billion kronor and 78 billion kronor respectively," it said.

The debt office had previously said it expected to see a budget deficit of around eight billion kronor next year, while Tuesday marked its first forecast for 2012, according to Håkan Carlsson, who heads up the office's budget forecast division.

"In an international perspective, Swedish finances appear strong," Carlsson told AFP.

Tuesday's announcement came as the European Union president warned the 27-nation bloc would not survive if it failed to overcome a debt crisis plaguing euro currency governments which has already brought Greece to its knees, and now threatens Ireland and Portugal.

Sweden, an EU member but not part of the eurozone, meanwhile should be able to reduce its lending going forward due to its improved financials, the debt office said.

The Swedish central government debt, which unlike the public debt does not include social security and regional authority obligations, was expected to correspond to 35 percent of the country's gross domestic product this year, the debt office said.

In 2011, it would likely correspond to 33 percent of GDP, and in 29 percent in 2012, it added.

Sweden's total public debt stood at around 39 percent at the end of 2009, down from its all-time high of 76 percent of GDP in 1996.

Although Sweden is not a member of the eurozone, it is one of few European Union countries to fully respect the Maastricht criteria for euro countries, which among other things require that public debt not exceed 60 percent of GDP and that the annual public deficit remain below three percent of GDP.