HELSINKI, Dec. 16 (Xinhua) -- Sweden's economy has begun to recover after a weak start to 2025, with domestic demand supported by expansionary fiscal policy expected to remain the main driver of growth, the Swedish government said in a forecast released Tuesday.

Finance Minister Elisabeth Svantesson said economic activity has picked up in recent months and gross domestic product (GDP) growth has been "somewhat stronger than expected," indicating that a cyclical upturn is under way.

The government raised its projection for GDP growth in 2025 to 1.6 percent from 0.9 percent as forecast in September. Growth in 2026 was revised slightly downward to 3 percent from 3.1 percent.

Looking ahead, the recovery is expected to be driven mainly by domestic demand, underpinned by rising incomes and pent-up consumption needs, which are projected to support continued growth in household spending in 2026, the government said.

Business investment is also expected to accelerate compared with recent years, it added.

Despite the improvement, unemployment remains high but is expected to gradually ease from early 2026 as demand for labor increases. The government forecast the unemployment rate at 8.8 percent in 2025 and 8.3 percent in 2026, both 0.1 percentage points higher than earlier estimates.

"Now the recovery in the Swedish economy is under way," Svantesson said, adding that fiscal policy is supporting the upturn by strengthening households' purchasing power while also boosting public consumption and investment. The downturn is expected to be over by 2027, she said. ■