The International Monetary Fund said that the 17-member eurozone is expected to underperform this year with economic growth projected to reach just 1.5 per cent.

Although this growth shows that the euro area is managing to exit the recent crisis, compared to the other major economies it is still lagging behind.

According to IMF forecasts, the eurozone’s projected growth rate is considerably lower than the projected rate of 4.4 per cent for the world economy. Europe’s economy is also growing at a lower rate than the United States, whose economy is forecast to grow by three per cent in 2011, and China, whose projected growth rate for 2011 is 9.6 per cent.

Among EU countries, Germany’s projected growth has been revised slightly upwards, to 2.2 per cent, due to “stronger domestic demand”. However, the other major EU economies – France, Italy and the United Kingdom – lag behind Germany, although they are forecast to expand slightly.

According to government projections, Malta’s economy is expected grow by three per cent in 2011. If this projection materialises, Malta would have one of the biggest growth rates among the members of the eurozone.

In its World Economic Outlook report published this week, the IMF said that the ongoing economic problems of the eurozone – notably high levels of sovereign debt and fragile financial institutions – are hindering the global economic recovery.

“Renewed stresses in the euro area periphery are contributing to downside risks,” the IMF said, while suggesting that “the most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area”.

According to IMF, even though the peripheral economies in trouble – Ireland, Greece, Spain and Portugal notably – only account for a small portion of the eurozone’s economy and trade, there is a risk of such countries’ financial turmoil spreading from the periphery to the core of Europe. This is because of the “continuing weaknesses among financial institutions in many of the region’s advanced economies, and a lack of transparency about their exposures”.

The IMF acknowledges that the EU has taken steps, in 2010, to reduce its vulnerability, notably by creating an EU bailout fund to prevent heavily indebted eurozone countries from defaulting on their loan payments. But it says that additional actions are necessary, such as “new stress tests that are more realistic, thorough and stringent”. The nascent EU bailout fund must be able to raise sufficient resources, it adds, and the European Central Bank must continue to provide liquidity.

In assessing Ireland’s sovereign debt crisis in late 2010, which led Dublin last November to seek an €85 billion EU-IMF loan, the report noted how the Irish crisis did not have as detrimental an impact as Greece’s default crisis did earlier in the year when the EU and IMF loaned Athens €110 billion, in May 2010, to rescue it from financial collapse.