Moody's Investors Service has revised downwards its 2011 growth forecast for most G-20 economies to 3.1% from 3.7% due to the "material slowdown in the recovery from the 2008-09 global financial crisis and recession".
It also lowered its real growth forecast for these economies to "around" 3.2% in 2012 compared with 4%, previously.
"Financial market volatility stemming from the escalation of the debt crisis in the euro area and accompanying the US fiscal outlook discussions earlier in the year have affected consumer and business confidence," said the ratings agency in a research report. "We expect that financial market turbulence, fiscal consolidation efforts and banking sector deleveraging will continue to constrain growth into 2012."
Moody's said the euro area debt crisis presented the "most immediate risk" to euro area and global growth.
"While the recently announced euro area package of measures provides temporary liquidity relief for sovereigns and banks, the medium-term strategy for addressing the underlying sovereign debt challenges - which remains reliant on fiscal consolidation and competitiveness measures to foster growth - is subject to significant implementation risks," said Moody's.
Furthermore, the precedent being set with the requirement for private sector participation as a condition of continued support for Greece represents a "structural break in the funding costs for stressed or potentially stressed euro area countries". This leaves the euro area sovereign debt markets prone to disruption, warned Moody's.
Additionally, the increased capital requirements for banks are "likely to exacerbate" the credit contraction already underway. "We therefore believe that there is a high risk of a euro area recession, defined as two consecutive quarters of negative growth. In fact, a number of leading indicators have reached levels that are historically consistent with a recession," said Moody's.
Also, even though oil prices have currently stabilised, the risk of a further flare-up of turmoil in the MENA region has not dissipated, said Moody's.
The ratings agency said an oil price supply-side shock "will not only have direct negative implications for global growth but will also contribute to inflationary pressures, and could have second-round effects on growth" via consequent increases in interest rates.