Nordic countries saw their economies pummeled at the start of the financial downturn, but their smaller markets and related exchange traded funds (ETFs) were among the first jump back. Some are even growing so quickly that rate hikes are needed to cool things off.

Of all the western European countries, only Sweden and Norway’s Central Banks have recently deemed it safe to increase rates, according to The Swedish Wire. Sweden raised rates to 0.5% from 0.25% on strong economic numbers, with household spending jumping 3.5% in the first quarter, which was better than what most economists expected. The Swedish economy expanded 1.4% compared to the previous quarter and 3% year-over-year. [Europe ETFs: Sidestepping the Ailing Countries.]

The Riksbank revised upward its economic growth forecast to 3.8% for the year from its 2.2% estimate in May, but it expects that slower global growth may keep the Sweden’s growth at just 3.6% in 2011. The Central Bank also expects to keep rates at 0.5% through the third quarter before raising it to 0.9% in the fourth quarter. [Know Which ETFs Come With Euro Exposure.]

Government stimulus of around 1.2% of GDP this year and increased demand for Sweden’s exports has pushed along the recovery, along with housing prices, reports Johan Carlstrom for BusinessWeek.

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