Oil prices then plunged to a trough in 2016, causing widespread disruption to oil-exporting countries (Baffes et al. 2015). At end-2018, energy prices were still 32 percent below their 2011 highs, industrial metals prices 20 percent below, and agricultural commodity prices 29 percent below. The decline in commodity prices—compounded by policy tightening as resource revenues collapsed, and reserves declined—dampened growth in the two-thirds of EMDEs that rely heavily on commodity exports (World Bank 2018b).

Capital flows to EMDEs have been volatile since the global recession, with repeated spikes in borrowing cost since mid-2013. Following the post-recession rebound, global capital flows have declined with episodes of sharp outflows in 2013, 2015, and 2018.<sup>5</sup> During these episodes, on average, the EMBI spread rose by about 50 basis points, the MSCI stock price index declined by 7.7 percent, capital inflows to EMDEs slowed sharply, and EMDE currencies depreciated against the U.S. dollar (Figure 7). While portfolio and other investment flows to EMDEs underwent bouts of reversals, FDI flows and remittances to EMDEs have remained more stable.

EMDE growth has slowed since 2010 to a trough of 4.1 percent in 2016 before a modest recovery took hold (Arteta and Kasyanenko 2019). The growth slowdown during 2011-16 was synchronous (affecting more than three-fifths of EMDEs) and protracted, with the steepest slowdowns in LAC and the mildest in South Asia (SAR). In LICs, growth slowed from 6.9 percent in 2012 to a trough of 4.8 percent in 2016. Amid this broad-based growth weakness, EMDEs have struggled to fully unwind fiscal and monetary stimulus (World Bank 2015a, 2017a, 2019a).

Most components of EMDE demand growth slowed concurrently. Investment and export growth suffered especially sharp declines, to less than half their rates prior to the global recession (World Bank 2017b, 2019a). In 2017, EMDEs saw a mild cyclical recovery, led by growth in exports and investment as global manufacturing and trade picked up, but EMDE growth has since slowed again. Much of the post-crisis slowdown appears to have been structural in nature. Estimates of potential output growth in EMDEs slowed from 5.9 percent a year in 2003-07 to 4.8 percent a year in 2013-17, reflecting the effects of weak investment on capital stocks, demographic trends turning from tailwinds to headwinds, and slower productivity growth (Ruch 2019a).

This has meant a reversal of rapid pre-crisis convergence with advanced-economy per capita incomes. In 2019, per capita income gaps with advanced economies are expected to widen in about one-third of EMDEs—and more in the Middle East and North Africa (MNA), LAC, and Sub-Saharan Africa (SSA). That said, in SSA, especially, there is wide heterogeneity. In the largest three economies (Angola, Nigeria, South Africa), per capita income growth has been negative since 2015-16. Some metal exporters and countries affected by fragility, conflict and violence have also had weak per capita growth. In contrast, some non-resource-intensive economies have had robust per capita income growth. Weak EMDE growth has also slowed the pace of decline in between-country

> 5 These episodes were especially pronounced in the third quarter of 2013, third quarter of 2015, and second quarter of 2018.