The global economic recovery has lost momentum, and there are several economies that are still facing significant challenges and are unlikely to quickly resume ‘normal’ growth rates, says Moody’s Investors Service in a new report.

Overall, the rating agency expects real gross domestic product (GDP) growth in the G20 advanced economies of around 1.2% during 2013, which is a little weaker than its previous forecast. It sees 1.9% growth after that in 2014. Moreover, Moody’s is forecasting only a gradual improvement in confidence and spending over the next two years “given that fiscal consolidation and high joblessness have continued to impede recovery.”

Moody’s expects the euro area economy, in particular, to experience a deeper and lengthier recession than previously thought. And, it says that U.S. spending cuts will weigh on the renewed momentum that is visible in the private sector. Additionally, some major emerging market economies face challenges in spurring investment growth to drive sustainable increases in national income, it says.

For example, while China is likely to see broadly stable growth this year, it cautions that Brazil and India are struggling to boost investment and wider economic growth in the face of private-sector caution and relatively high inflation. Overall, the rating agency now expects real GDP growth in emerging G20 economies to be around 5.5% in both 2013 and in 2014, which is somewhat weaker than its previous forecast.

Moody’s says that since February, there has been some crystallization of risks it had previously highlighted, with the euro area in particular now likely to see a deeper-than-expected recession. And, European policymakers’ increased tolerance for risk, along with heightened tensions on the Korean peninsula have also become apparent over the past three months, it says.

It sees the biggest short term risks as: a deeper-than-currently-expected recession in the euro area, accompanied by deeper credit contraction; slower-than-expected growth in major emerging markets; and, an escalation of geopolitical tensions.