RIYADH: Over 100 countries, including major economies like China, India, Brazil, and South Africa, face significant challenges that could impede their efforts to achieve high-income status in the coming decades.
This is according to a new World Bank study, which presents the first comprehensive roadmap to help developing countries escape the so-called “middle-income trap.”
It introduces a “3i strategy” for countries to achieve high-income status.
The report titled “The World Development Report 2024: The Middle Income Trap” reveals that as countries become wealthier, they often encounter a “trap” when their gross domestic product per capita reaches about 10 percent of annual US GDP per person—approximately $8,000 today.
This figure falls within the range classified as “middle income” by the World Bank. Since 1990, only 34 middle-income economies have transitioned to high-income status, with more than a third of these countries benefiting from either EU integration or previously undiscovered oil reserves.
“The battle for global economic prosperity will largely be won or lost in middle-income countries,” said Indermit Gill, chief economist of the World Bank Group and senior vice president for Development Economics.
By the end of 2023, 108 countries were classified as middle-income, with annual GDP per capita ranging from $1,136 to $13,845. These nations are home to 6 billion people—75 percent of the global population—and account for two-thirds of the world’s extreme poverty. They also generate over 40 percent of global GDP and more than 60 percent of carbon emissions.
These countries now face even greater challenges than their predecessors in overcoming the middle-income trap, including rapidly aging populations, rising protectionism in advanced economies, and the urgent need for an accelerated energy transition.
“Too many of these countries rely on outmoded strategies to become advanced economies. They depend just on investment for too long—or they switch prematurely to innovation. A fresh approach is needed: first focus on investment; then add an emphasis on infusion of new technologies from abroad; and, finally, adopt a three-pronged strategy that balances investment, infusion, and innovation. With growing demographic, ecological, and geopolitical pressures, there is no room for error,” Gill said.
Depending on their stage of development, countries need to adopt a sequenced and progressively sophisticated mix of policies.
“The road ahead won’t be easy, but it’s possible for countries to make progress even in today’s challenging conditions,” said Somik V. Lall, director of the 2024 World Development Report. “Success will depend on how well societies balance the forces of creation, preservation, and destruction. Countries that try to spare their citizenry the pains associated with reforms and openness will miss out on the gains that come from sustained growth.”
