However, UBS still expects emerging countries to outperform industrialized nations, but the bank expects the annualized real growth rate to hover around 5% or less in the first half of 2012, compared with 7-8% at its peak and 5.5% last year.
UBS report said, "We are now back to a relatively ‘normalized’ GDP growth breakdown, with solid consumption and relatively positive investment demand in all regions."
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The report also added that inflationary pressures are subsiding, with global agricultural prices flat for 2011.
"We do expect ongoing structural credit recovery in 2012 and beyond, but with a global slowdown now underway we certainly don’t look for an explosion of credit activity any time soon. And as before, the Middle East and Africa still face the weakest recovery prospects," said UBS.
UBS in its report also cautioned about capital flows into emerging markets, especially into local-currency debt markets.
UBS also opined that the trend of more global portfolios shifting into EM local currency is sustainable over the medium term, in the short term it is doubtful of further flow prospects due to increased volatility.
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