World Bank declares 108 developing nations grapple with middle-income trap

(MENAFN) According to a new World Bank study released Thursday, the middle-income trap poses significant challenges for 108 developing countries, including major economies such as China, India, Brazil, and South Africa. The study highlights that as countries advance in wealth, they often encounter a "trap" when their annual GDP per capita reaches about 10 percent of that of the United States—approximately USD8,000 today. This level of income places them in the World Bank’s middle-income category, making it difficult for these nations to progress further towards high-income status.

Since 1990, only 34 middle-income economies have successfully transitioned to high-income status. Notably, more than one-third of these successful transitions were facilitated by integration into the European Union. As of the end of 2023, 108 countries were classified as middle-income, with annual GDP per capita ranging from USD1,136 to USD13,845. Despite being home to 6 billion people, or 75 percent of the global population, a significant two-thirds of individuals in these countries live in extreme poverty.

These middle-income countries contribute over 40 percent of global GDP and are responsible for more than 60 percent of carbon emissions. They face substantial obstacles compared to their predecessors, including rapidly aging populations, rising protectionism in advanced economies, and the urgent need to accelerate the energy transition. The study underscores that overcoming these challenges is critical for global economic prosperity.

Indermit Gill, chief economist of the World Bank Group and senior vice president for development economics, emphasized that the future of global economic prosperity largely depends on how these middle-income countries navigate their development. He criticized the reliance on outdated strategies that focus too heavily on investment or prematurely shift to innovation. Gill advocated for a balanced approach that integrates investment, new technologies from abroad, and innovation to effectively address the middle-income trap and achieve advanced economy status.

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