The economy grew an annualized 3.7 percent in the October-December period, more than twice the rate forecast, thanks to strong capital investment and exports, the Cabinet Office said Thursday in a preliminary report.

But analysts still warned that the outlook is far from rosy, noting the economy faces challenges in the coming months from the recent market turbulence and fears of a global economic slowdown.

Gross domestic product, the broadest measure of economic health, in the last quarter of 2007 expanded from revised annualized growth of 1.3 percent in the July-September quarter.