The Swedish krona gains against the dollar and the euro.

• ‘Sweden needs to sell itself more’
• Sweden overtakes the US in competitiveness

The country's GDP increased 7.3 percent in the fourth quarter compared to the fourth quarter of 2009, beating analyst expectations, official statistics showed Tuesday. Compared with the third quarter GDP increased 1.2 percent.

The Swedish krona gained against the dollar and the euro after the data was released. The krona is the best performing major currency this year against the dollar, the euro and the yen.

Sweden, which emerged from recession in the second quarter of 2009 and saw growth quickly pick up in the first quarter of 2010 -- largely thanks to a rebound in exports -- now has one of Europe's strongest growth rates.

Sweden's gross domestic product growth slowed compared to the third quarter, when it reached 2.1 percent, but still outstripped the expectations of analysts polled by Dow Jones Newswires for 0.9 percent quarter-on-quarter. Year-on-year, Swedish economic growth sped up to 7.3 percent after hitting 6.9 percent in the third quarter, easily beating analyst expectations that growth would remain a 6.9 percent in the last three months of the year, Statistics Sweden said.

"The Swedish economy is growing across the board. The recovery is continuing with positive signals from the labour market. This means the central bank will continue to raise its (interest) rates," Nordea Bank analyst Annika Winsth told news agency TT.

Sweden's central bank last month hiked its key interest rate for the fifth time since July, a widely anticipated move, bringing it to 1.5 percent.

The bank explained the hike was due to continued growth in the Swedish economy and that it expected its key rate to reach 2.5 percent in 2012, up from the 2.2 percent previously expected.

The head economist of mortgage lender SBAB said Tuesday's figures confirmed the Riksbank had taken the right monetary policy line.

"The Swedish economy is booming!" Tomas Pousette told TT.

Finance Minister Anders Borg, who has referred to the country's economy as a "Tiger," shared analysts' enthusiasm but said challenges lay ahead.

"There is a substantial challenge ahead of us to manage both strong growth and low unemployment without creating imbalances," he told TT, saying growth of 5.5 percent in 2010 had beaten the government's expectations.

Sweden's unemployment rate, however, rose more than expected in January to 8.2 percent from 7.4 percent in December, but is following a downward trend annually.

In a report published in January, the Organisation for Economic Co-operation and Development also said Sweden's economy would continue to show strong growth this year and in 2012 after emerging relatively unscathed from the global slump.

The OECD put Swedish growth at 3.9 percent this year and 3.4 percent in 2012.