Moody’s Investors Service has cut its growth forecast, citing slower than expected growth in emerging market economies, and noting that serious downside risks remain.

The rating agency says that it now expects real growth in the G20 economies of around 2.8% in 2012 and 3.4% in 2013, down 0.2% and 0.1% from previous expectations. Therefore, real growth in 2012 will be materially lower than the 3.2% growth experienced in 2011 and the 4.6% growth in 2010, it says.

The lower forecasts come as Moody’s revised downwards its growth forecasts for the emerging G20 economies, due to a weaker environment generally and decelerating domestic demand. Overall, it now expects real growth in these economies to be around 5.2% in 2012, compared with its earlier forecast of 5.8%, and around 5.7% in 2013, compared with 6.0% previously.

“We are revising downwards our forecast for these large emerging market economies, where the weaker external environment and decelerating domestic demand are causing a slowdown in growth momentum,” says Elena Duggar, Moody’s group credit officer for sovereign risk. “We continue to expect that the slowdown in advanced economies and volatile capital flows will suppress growth in emerging markets.”

Moody’s also says it continues to expect only a modest recovery in the G20 advanced economies, with real growth of around 1.4% in 2012 and 2.0% in 2013, which is in line with its previous forecasts.

“We maintain our forecast for relatively robust growth in the U.S. and we continue to expect that the euro area as a whole will experience a mild recession in 2012. Financial markets volatility, fiscal consolidation efforts, weak consumer and business confidence, persistently high unemployment levels, and real-estate market weaknesses will continue to constrain growth in advanced economies,” it says.

Additionally, it notes that it sees elevated downside risks, which would pose a serious threat to the outlook for global growth if they are realized. The main risks to the outlook include: a deeper than expected recession in the euro area, a hard landing in major emerging markets, an oil-price supply-side shock resulting from resurfacing geopolitical risks, and a sudden and sharp fiscal tightening in the U.S. in 2013.