The economy ministry said the Spanish economy would create more than 600,000 jobs this year and start to chip away from next year at its debt mountain.
It said the overall jobless rate in 2015 would be 21.1 percent – one percentage point lower than its previous forecast, but still painfully high for ordinary Spaniards.
It confirmed its new growth forecast for this year, which it has revised sharply upwards from 2.9 to 3.3 percent.
That is more than twice the 1.5 percent average rate forecast by Brussels for the eurozone – a striking recovery after on-and-off recession in Spain between 2008 to 2013 that left millions of people out of work.
“For the first time since the start of the crisis in 2008, the Spanish economy is starting to see the light at the end of the tunnel,” Economy Minister Luis de Guindos told a news conference.
The conservative government imposed tough spending cuts and tax rises from 2012 that it said were necessary to stabilise public finances.
The governing Popular Party is now touting the recovery ahead of an election due from November, in which it faces a tough challenge from new anti-austerity parties.
Budget Minister Cristobal Montoro on Friday lowered the official forecast for Spain's public debt to 98.9 percent of gross domestic product from a previous outlook of 100.3 percent.
He said 2016 was likely to be “the first year in which we start, albeit modestly, to lower the burden of debt on GDP,” which he said will decline to 98.5 percent.
The average debt level across the countries of the eurozone was 92.1 percent at the end of 2014, according to official data.
The Spanish government's forecast for the public deficit – a key indicator of financial stability that measures how much spending exceeds income – stands at 4.2 percent of GDP for this year.
The government forecasts it will fall below the three percent level set by European treaties in 2016.
The last official unemployment rate, for the first quarter of this year, was 23.78 percent. But the government forecast on Friday that this would dip just below the symbolic 20 percent level in 2016.