Finland's economy will shrink by 7.6 percent this year, its worst performance in more than 50 years, the government said Friday.

The Finance Ministry had earlier predicted a 6 percent drop in GDP in the small Nordic economy severely hit by the recession because of its dependence on exports.

But, the ministry said, the worst is over.

"The cyclical downturn has now bottomed out, and the economy is settling into a slower path of growth than before," the ministry said in an economic review. "Economic activity is recovering ... (but) the rate of growth is expected to remain moderate."

The government also revised its growth prediction for next year — to 0.7 percent from an earlier estimate of 0.5 percent — and said the increase would be 2.5 percent in 2011.

The head of the ministry's economics department, Jukka Pekkarinen, said "clear signs" of global economic recovery have resulted in a slight improvement in Finland's export market.

"Domestic demand too — in the form of private consumption — appears to be headed for recovery," he said. "So, on a wide front there has been a turn for the better."

But, Pekkarinen cautioned, "we have to be prepared that in Finland's case it will be ... fairly modest, at least as far as next year is concerned."

The first signs of an improvement in the economy — which had shown negative GDP figures since September 2008 — was in the third quarter when output improved 0.3 percent compared to the previous period. But it was down 9.1 percent from the third quarter in 2008.

The country of 5.3 million also has been dogged by unemployment, made worse by the recession.

Leading global paper makers based in Finland and the country's pride — Nokia Corp., the world's biggest mobile phone maker — have announced thousands of layoffs, adding to the government's woes.

Unemployment, which had been on a steady 10-year decline until the recession, started an upward curve peaking at 10.9 percent in May. It was 8.2 percent in October — the highest October rate in six years — when 215,000 people were out of work.

The ministry warned that the jobless rate would grow from an average 8.5 percent this year to 10.5 percent in 2010.

"The number of employed will decrease by 80,000 people this year and the number of unemployed will increase by over 50,000 people," the ministry's report said.