In the 2009 episode, there were some stark differences across EMDE regions (Figure 8.D; Table 5). ECA took the largest hit partly because the withdrawal of Western European banks caused a severe credit crunch, and the region’s per capita output declined by more than 5 percent in 2009. Per capita output in LAC and the Middle East and North Africa (MNA) also contracted as commodity prices and exports collapsed. In EAP and SAR, expansions continued, partly reflecting heavy use of monetary and fiscal stimulus in the largest economies to support activity (World Bank 2009, 2010a, 2010b). Unlike the previous global recessions, when SSA experienced declines in per capita output, the region was able to avoid recession in 2009 partly because it had limited exposure to global financial markets but stronger linkages, especially through trade, with the large emerging market economies of EAP, which continued growing (Fosu 2013).

# 4.2. Global Recoveries

A global recovery typically involves broad-based rebounds in multiple measures of economic activity and financial markets. The strength of recoveries differs across countries and country groups. For instance, there is evidence that recoveries from the four global recessions tend to be weaker in countries with fixed exchange rate regimes than in countries with more flexible regimes (Terrones 2019). Following the 2009 global recession, advanced economies experienced the weakest recovery among the four episodes while EMDEs enjoyed their strongest.

Broad rebound in activity. Most indicators of global activity started expanding in the first year of each recovery (Figure 9.A). The average growth rate of global output in the first year (or the first three years) of recoveries was close to the average growth rate in a typical year of the full sample period (Table 6). The growth rates of consumption, investment, and international trade picked up in the first year of each recovery while oil consumption tended to increase. The global recovery from the 1975 recession was the strongest in terms of average output growth in the first three years of the recovery, as well as in terms of growth in the first year. The recovery after the 1991 global recession was the weakest.

Recoveries in financial markets. Global financial markets have tended to rally as recoveries have strengthened over time (Figure 9.B). In the recoveries from both the 1991 and 2009 recessions, for which these estimates are available, broad financial conditions loosened further in the first year of the recovery but then gradually tightened. Although global equity prices on average have picked up quickly, in the first year of recoveries, house prices have tended to remain depressed for two to three years. Credit growth has also generally taken longer to attain the rates observed during non-recession periods. Housing markets were depressed mostly during the recoveries following the three most recent global recessions. Equity markets remained weak during the recovery from the 1975 recession, partly reflecting the stagflation in several major advanced economies.

The 2009 episode, which saw the lowest rate of inflation during a recession, was followed in 2010 by a further dip of inflation to near zero. It thereafter rose quite modestly, to stabilize at a rate in the low single digits. Because of the depressed inflation post-2009, accommodative monetary policies kept nominal interest rates low, and real interest rates 15