LICs remained resilience and continued to grow during the crisis, although more slowly (4.9 percent in 2008 and 5.3 percent in 2009, compared to 6.0 percent in 2007), as domestic demand was supported by public investment in part financed by robust FDI and remittances and broadly stable foreign aid (World Bank 2019). FDI inflows to LICs averaged 3.3 percent of GDP during 2008-09 compared to 2.5 percent of GDP during the pre-crisis period (200207). Remittances into LICs averaged 5.9 percent of GDP during 2008-09, an increase of 1.3 percentage points over the pre-crisis average. ODA to LICs declined marginally to 9.2 percent of GDP from 10.3 percent of GDP over the same period. Exports were also less adversely affected. In the median LIC, exports rose by 2.2 percent in 2009, compared to -6.1 percent in other EMDEs.

The pace of poverty reduction slowed or poverty increased in some EMDEs with steep recessions (Habib et al. 2010).<sup>13</sup> In ECA, following a large growth setback during the global recession, the proportion of people living in extreme poverty declined, on average, by only 0.2 percentage point a year in 2008-2010, compared to the average decline of 0.7 percentage point a year in 2005-08.<sup>14</sup> In LAC, where output also contracted during the global recession, the average improvement in the proportion of people living in extreme poverty slowed to 0.4 percentage point a year in 2008-2010 from 1.0 percentage point a year in 2005-08. More broadly for EMDEs, due to strong growth in EAP and SAR during the global recession, poverty declined by 1.2 percentage points a year in 2008-2010. Former studies show that the impact of economic crisis varies across income groups, often resulting in rising income inequality (Habib et al. 2010; Ravallion 2009). In regions such as MNA and SSA, the average Gini coefficient, a commonly used measure of inequality, increased during the global recession.

# **4. The decade after the 2009 global recession: Protracted weakness**

An easing in global fiscal and monetary policy promoted a rapid growth rebound in 2010. The following year, however, was the start of a decade of protracted weakness in the global economy. Global trade growth slowed sharply from pre-recession rates and commodity prices fell. The euro area plunged into a debt crisis in 2010-11. In 2013, as financial markets began to anticipate the reduction of large-scale asset purchases by the US Federal Reserve, financing conditions tightened for EMDEs. This sluggish and volatile external backdrop coincided with country-specific challenges in some major EMDEs. Meanwhile, the weakness of investment that accompanied the global downturn and less favorable demographic trends continued eroding potential growth (i.e., the growth rate an economy can sustain at full employment and capacity utilization).

During the initial rebound, supported by stimulus in the largest advanced economies and EMDEs, global trade rebounded, commodity prices rallied, and financial conditions eased in

> 13 It was initially estimated that the global financial crisis would add 64 million people to the population living under $2 a day (Ravallion and Chen 2009). For advanced economies, there is evidence of adverse impacts of the 2009 global recession on poverty and health (Bitler, Hoynes, Kuka 2017; Schwandt and von Wachter 2019; Seeman et al. 2018). 14 People living in extreme poverty are those living on less than $1.90 a day at 2011 PPP. Data are obtained from https://databank.worldbank.org/source/poverty-and-equity-database.

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