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Has the IMF got it wrong on emerging markets?

Karl Johaentges | Look | Getty Images

This week the International Monetary Fund (IMF) gave a bleak outlook for emerging market economies, slashing its growth forecasts, but some say the body has got it wrong.

The IMF warned on the region's weakening growth, which it attributed to tightening capacity constraints, falling commodity prices, less policy support and slowing credit growth. However, some economists told CNBC they weren't fully convinced that it's all doom and gloom for the emerging world.

"Bottom line, we think [Olivier] Blanchard is wrong," said Tim Condon, managing director and head of research for Asia at ING, referring to the IMF's chief economist.

(Read more: IMF cuts growth forecast for emerging world)

According to Condon, recent emerging market under-performance has been purely cyclical, whereas the IMF report argues that the region is suffering a cyclical downturn and dampened growth prospects.

"The developed market - emerging market performance gap is cyclical. It's due to more accommodative developed market monetary policy," said Condon, referring to the U.S., U.K. and Japan's use of quantitative easing in recent years.

Condon expects developed markets' out-performance to continue in the fourth quarter, but said some emerging markets would outperform because their central banks were using the accommodative monetary policies that enable domestic demand to offset slowing export growth. He cited the Philippines and Indonesia as examples.

The Philippines' inflation rate accelerated to a three-month high in September, but remained well below the government's target of between 3 and 5 percent, giving its central bank ample room to hold rates steady at a record low. Meanwhile Indonesia's central bank has hiked interest rates 150 basis points since June to 7.5 percent, in an attempt to shore up losses in the rupiah, caused by sharp capital outflows amid tapering fears.

Condon also expects Korea and Thailand's equity markets to outperform as well, as tight monetary policies used by their central banks is likely to increase the appeal of placing one-way bets on their currencies, attracting hot money into their equity markets.

(Read more: IMF: What a month-long shutdown could look like)

South Korea's central bank has held interest rates steady at 2.5 percent for the past five months, and most analysts are pricing in rate hikes for next year and 2015.

Thailand's central bank last cut rates to 2.5 percent in May, but after the economy unexpectedly fell back into recession in the second quarter, analysts expect rates to be kept on hold until next year.

So far this year, the MSCI Emerging Market Index has lost near 5 percent, while the MSCI World index, which focuses on developed markets, has gained 13.5 percent over the same period.

Emerging markets had a particularly grueling few months following the fallout from the U.S. Federal Reserve's tapering talk, when the MSCI Emerging Markets index fell over 16 percent from late May to late June.

However, the U.S. government shutdown, which was set to move into its tenth day on Wednesday, has seen some flows back into the unloved region, and the MSCI Emerging Market index has rallied 1.7 percent since October 1.

(Read more: Emerging markets may become new force in euro rally: Goldman Sachs)

Kelly Teoh, market strategist at IG, said she agreed with the IMF's main worries over emerging markets' structural issues, but also pointed out that IMF reports tend not to be forward looking and can often be behind the curve. She also said the IMF could be underestimating the region's growth prospects.

"The market cap for individual Asian countries is small compared to the U.S. so whenever there are fund flows into these countries, the upside potential is strong. The aggregate value of all Asian economies makes it the second largest after the U.S., so Asia is contributing 50 percent of global growth," she said. "As long as global growth picks up, emerging markets should benefit the most," she added.

Teoh added that she expected upcoming trade deals to take place in Asia, a further boost for the region as it hedges its bets against the Federal Reserve's monetary policy.

In Teoh's view tapering will not occur for at least a year, following President Obama's official nomination of the dovish Federal Reserve Vice Chairman Janet Yellen as Fed Chief Ben Bernanke's replacement when his term expires early next year.

— CNBC's Katie Holliday: Follow her onTwitter @hollidaykatie

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