World Bank's Country Classification by Income Level

The World Bank Group has released its annual classification of the world’s economies by income level for the period 2024-2025. This classification divides countries into four income groups: low, lower-middle, upper-middle, and high. The updates are based on the Gross National Income (GNI) per capita of the previous calendar year, measured in US dollars using the Atlas method.

Understanding the Atlas Method

The Atlas method, introduced in its current form in 1989, is used to calculate GNI by adjusting exchange rates to account for inflation and price differences across countries. This method ensures a more stable and comparable measure of economic capacity, which is crucial for classifying countries into appropriate income groups.

Income Classification: An Indicator of Development

The World Bank’s income classification is designed to reflect a country’s level of development. By using Atlas GNI per capita as a broadly available indicator, the classification provides insights into the economic capacity and overall economic health of countries around the world. This system helps in identifying where countries stand in terms of income and development, which in turn influences global economic policies and aid distribution.

Shifts in Income Classification Over Time

The classification of countries by income has seen significant changes since the late 1980s. In 1987, 30% of reporting countries were classified as low-income, while 25% were classified as high-income. By 2023, these proportions had shifted dramatically. Only 12% of countries fell into the low-income category, while the high-income category had grown to encompass 40% of countries. These shifts highlight the global economic growth and development that have taken place over the past few decades.

Current Income Classifications for 2024-2025

As of July 1, 2024, the World Bank’s updated income classifications for countries are based on GNI per capita data from the previous calendar year. These classifications are crucial for understanding the economic landscape and are used by international organizations, governments, and policymakers to tailor economic policies, development aid, and investment strategies.

• Low-Income Countries: These are countries with a GNI per capita of $1,045 or less.
• Lower-Middle-Income Countries: These countries have a GNI per capita between $1,046 and $4,095.
• Upper-Middle-Income Countries: Countries in this group have a GNI per capita between $4,096 and $12,695.
• High-Income Countries: These are countries with a GNI per capita of $12,696 or more.

Implications of Income Classifications

The classification into different income groups has profound implications for countries. It affects their eligibility for financial aid, development programs, and loans from international organizations like the World Bank and the International Monetary Fund. It also influences foreign direct investment, trade relations, and economic policies at the national level.

Conclusion

The World Bank’s income classifications for 2024-2025 provide a vital snapshot of the global economic landscape. By categorizing countries into low, lower-middle, upper-middle, and high-income groups based on GNI per capita, the World Bank helps to highlight the economic progress and challenges faced by different nations. The significant shift in the distribution of countries across these categories since the 1980s reflects global economic trends and underscores the importance of continued efforts to support economic development and reduce poverty worldwide.