commodity demand growth over the next decade (Baffes et al. 2018).

Weak prospects put at risk the achievement of poverty reduction goals. The rate of poverty reduction has slowed since the 2009 global recession (World Bank 2018c). Poverty declined by 1.25 percentage points per year between 2011 and 2013, but by only 0.6 percentage points per year between 2013 and 2015. Forecasts for these trends to 2018 suggest a further slowdown to 0.5 percentage points per year. Over the longer term, weaker long-term growth prospects put at risk the achievement of the target of lowering the global extreme poverty rate to 3 percent of the population by 2030. Even if the growth rates of 2005-15 are maintained, the world will not be able to reach the 3 percent global poverty rate target set for 2030 (Figure 12).<sup>6</sup> This is because more than half of the global poor now reside in SSA, where per capita growth is feeble. Based on current trends, the share of global poor living in SSA will likely increase to 87 percent by 2030.<sup>7</sup>

# 7. Lessons and policy challenges

## 7.1 Lessons

The 2009 global recession and the long shadow it has cast over the subsequent decade offer important lessons for EMDE policymakers today (Kose and Ohnsorge 2019).

In a recession, early policy action is critical. The sizable, prompt, and coordinated policy stimulus that was implemented at the height of the global financial crisis in 2008 could not prevent the subsequent global recession, but it did help dampen its severity. EMDEs benefited from their own policy stimulus as well as that of major advanced economies. They were able to engage in such stimulus because they had accumulated policy room before the crisis.

Policy room is needed to respond to adverse shocks. The global recession has shown, once again, not only the importance of taking action to prevent crises and their repercussions but also the importance of creating and preserving policy room to enable countries to act when their economies are hit by crises and other shocks. Low inflation allowed central banks to implement monetary stimulus, ample foreign currency reserves allowed them to dampen exchange rate volatility, and sound fiscal positions (narrow deficits and low debt) permitted them to support activity with fiscal stimulus. The global recession also underscored the challenges of unwinding stimulus in an anemic post-crisis environment.

Sound policy frameworks help create policy room. The prevalence of flexible exchange rate arrangements and inflation targets served EMDEs well during the global recession by helping create policy room before the recession. In the runup to the global recession, exchange rate flexibility had helped discourage the buildup of large foreign currency

> 6 For a more detailed discussions, see World Bank (2018c); Dollar, Kleineberg and Kraay (2013); Dollar and Kraay (2002); Foster and Székely (2008); Ravallion and Chen (2003); and Santos, Dabus, and Delbianco (2019). 7 To reach the 2030 goal of global poverty rate of 3 percent, GDP per capita in SSA would need to grow by 6 percent per year, with the bottom 40 percent of the population achieving 8 percent growth, that is, there would have to be a reduction in income inequality. The last three years, 2017-2019, have seen no per capita growth in SSA. In fact, only a small and declining proportion of EMDEs have achieved such growth in any year since 2009 (World Bank 2019a).