The independent Office for Budget Responsibility (OBR) has raised its estimate for economic growth this year to 1.8% from 1.2%.
However, the body has downgraded its forecasts for both 2011 and 2012, from 2.3% to 2.1%, and from 2.8% to 2.6% respectively.
Despite the longer-term downgrades, the OBR said the economy has performed well over the last few months.
"The UK economy has recovered more strongly since the spring than the interim OBR expected at the time of the June Budget," it said. "GDP growth was greater than expected in both the second and third quarters."
It added unemployment has fallen to levels it did not expect to see until the middle of 2012. The expected number of public sector job losses over the next four years has also been revised to 330,000, down from 490,000.
The OBR's forecasts precede the government's annual Autumn budget statement, which will be given this afternoon.
The updated growth projection for 2010 comes after initial figures published by the Office for National Statistics last month estimated the UK economy grew by a better-than-expected 0.8% between July and September.
OBR said its "central forecast is the country will continue to recover from the recession", but this will be at a slower pace than recoveries in previous decades.
It said such "sluggish medium term growth" reflects the gradual normalisation of credit conditions and the impact of the government's fiscal consolidation.
Meanwhile, the impact of the updated growth projection on financial markets will be closely watched, with nervy investors looking for some good news amid the fallout from the Irish bailout.
AS of shortly before 2pm, the FTSE was 47 points, or 0.83%, lower at 5,621.
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