According to the QNB Group report, the growth in emerging markets (EMs) - from Brazil to Indonesia, Russia and South Africa - is slowing down, partly reflecting the tightening of domestic policies by these countries last year to stabilise foreign exchange rates.
This slowdown is impacting global export demand and affecting recovery in advanced economies as well, it added.
Overall, the slowdown in EMs could jeopardise the global recovery, unless advanced economies pick up the pace, the report added.
Since the US Federal Reserve's announcement last year to taper its asset-buying programme Quantitative Easing (QE), global capital flew out of emerging economies, forcing their central banks to tighten monetary policies to stabilise exchange rates.
While the tightening has been relatively successful in reversing the capital outflow in some countries, there has been an impact on the growth of emerging markets.
The last few weeks have seen a series of disappointing data releases in EMs. Brazil's Q1 real GDP growth rate slowed to 0.7 per cent (quarter-on-quarter annualised), compared with 2.3 per cent for 2013 as a whole. Indonesia's Q1 growth rate declined to 3.5 per cent (5.8 per cent in 2013). South Africa's s Q1 GDP contracted 0.6 per cent, compared with growth of 1.9 per cent in 2013.
The most dramatic fall was in Thailand with an annualised Q1 contraction of 8.2 per cent, partly reflecting the current political instability. Against this trend, India saw a jump in Q1 GDP growth, partly due to a record USD 5 billion spending on elections, which added an estimated 2 percentage points to growth in the first quarter.
This generalised slowdown in EMs growth is impacting global trade flows. These economies account for approximately 40 per cent of all global trade activities and have been among the largest contributors to the international export growth in recent years.
The slowdown in emerging markets is therefore having an impact on global export growth.
According to the World Trade Organisation, the USD value of global exports grew by a mere 1.7 per cent year-on-year in the first quarter of 2014, compared with 4.3 per cent in Q4 2013.
Most of this slowdown can be attributed to lower export demand from EMs. In turn, lower global export demand has contributed to lower Q1 real GDP growth in both the US (-1.0 per cent) and the Euro area (0.2 per cent).
So far, the slowdown in emerging economies has not yet resulted in a contraction in global trade as witnessed during the Great Recession of 2008-09, the QNB Group Report said.
If advanced economies continue to recover and pick up some pace, the global economy should be able to maintain its growth momentum, it added.
According to the report, the performance of advanced economies critically depends on the normalisation of US monetary policy and the Fed seems to be set on completing QE tapering in late 2014.
If QE tapering results in weaker US growth, long-term US interest rates are likely to remain below 3 per cent, thus pushing global capital out in search for higher returns in EMs, it said.
The result could be an uneven global recovery in favour of EMs, just like in the period 2010-13; on the other hand, if the US economy recovers as expected, long-term US interest rates are likely to go up, making EMs less attractive, and in turn, this would imply a further EM slowdown, while advanced economies recover, it added.