Why the recovery in the West is not all good news

Some emerging markets are in for "further painful adjustments" as economic growth gathers pace in many developed countries with investors looking to "rebalance" their portfolios, according to Moody's research.

The U.K and U.S. grew by 1.9 percent in 2013, while the euro zone saw a modest pick-up in the final three months of last year growing 0.3 percent.

But while several developed markets "have reached a genuine turning point", the emerging markets will continue to feel headwinds, the report said.

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"With several advanced economies now likely to see a more robust pace of recovery, the outlook for global growth has continued to brighten," Colin Ellis, associate managing director at Moody's said in a press release.

"However, in the near term stronger growth in advanced economies is likely to be associated with further painful adjustments in some emerging markets, as investors rebalance their portfolios."

(Read more: Will China be the 'savior' of emerging markets?)

The emerging markets have suffered a painful rout of late as some countries try to grapple with tumbling currencies, gaping current account deficits and soaring inflation. As the U.S. Federal Reserve continues to taper its asset purchase program, investors are pulling out of emerging markets.

India and Turkey's central bank recently raised interest rates to stabilize their currencies. Investors also remain concerned about a slowdown in the Chinese economy.

The result has been a huge exodus of money from emerging markets. Year-to-date equity outflows from emerging market funds hit $18.6 billion versus a $15.2 billion outflow for the whole of 2013, according to Morgan Stanley, citing data from fund-tracker EPFR Global.

But analysts say growth in the developed markets could stand to benefit emerging markets.

"There is a double edged sword here," Chris Williamson, chief economist at Markit told CNBC in a phone interview.

"On the one hand stronger economic growth in the developed world will encourage greater flow of money out of emerging markets into developed world markets, but on the other hand that might be a little short sighted because stronger growth in the developed world means there is a stronger market for emerging market exports, so many countries will stand to benefit from that stronger growth."

(Read more: Will emerging markets become a euro zone-style risk?)

Moody's predicts a "gradual acceleration" in economic activity in the G20 advanced economies with GDP growing around 2.3 percent this year and 2.5 percent in 2015.

Risks that have threatened to derail the economic recovery in developed markets such as the euro zone debt crisis and the U.S. fiscal deadlock have "significantly receded", Moody's said.

While the outlook is significantly better, Mike Ingram, market strategist at BCG Partners told CNBC in a phone interview, that "downside risks" still remain in the developed world, including an "unbalanced" economic recovery in the U.K. and problems in the euro zone's banking sector.

—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal