Economic Progress

The World Bank’s 2020 country classifications explained

world bank economics global economies money gdp income per capita gross domestic product wages forecasts coronavirus coivd

How does a country move from 'low income' to 'high income'? Image: Unsplash/Linus Nilsson

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  • Seven countries have moved into a higher income bracket in the World Bank’s latest country classifications.
  • Three have fallen.
  • This year’s groupings could change radically once the effects of the pandemic are clear.

The World Bank’s most recently updated country classification list provides a snapshot of the pre-pandemic economic health of the international community. The latest updates are released in July every year.

Have you read?

To create the category listings, the World Bank reviews all 189 of its member countries, plus 28 other economies with populations greater than 30,000. This year’s update is based on data collected before the coronavirus pandemic disrupted the global economy.

What are the World Bank country classifications?

The World Bank groups economies into one of four categories: low income, lower-middle income, upper-middle income, high income.

The categories are used to show how different groups of countries are doing against measures such as reducing poverty, growth, increasing income per head of population, and so on. For example, the data shows that while more than 6 in 10 of the world's population lived in low-income countries in the 1990s, today it has fallen to around 1 in 10.

Gross national income (GNI) per capita is the main indicator of how well off a country is and where it sits in the four categories. The 2020 GNI per capita thresholds are:

  • Low income: less than $1,036
  • Lower-middle income: between $1,036 and $4,045
  • Upper-middle income: between $4,046 and $12,535
  • High income: greater than $12,535

The Bank also takes into account geography, lending eligibility and the fragility of an economy.

There are, the World Bank says, two reasons for an economy to be moved between classifications. One is in-country change, such as increased or decreased economic growth, marked shifts in domestic inflation, or exchange rates. The data can also be influenced by changes in population, which will change the GNI ratios. The second likely cause of a country moving between categories is adjustments to the thresholds.

What’s changed this year?

Seven countries have moved into a higher category this year.

  • Benin: from low income to lower-middle income
  • Indonesia: from lower-middle income to upper-middle income
  • Mauritius: from upper-middle income to high income
  • Nauru: from upper-middle income to high income
  • Nepal: from low income to lower-middle income
  • Romania: from upper-middle income to high income
  • Tanzania: from low income to lower-middle income

While just three have dropped down:

  • Algeria: from upper-middle income to lower-middle income
  • Sri Lanka: from upper-middle income to lower-middle income
  • Sudan: from lower-middle income to low income

How will COVID-19 affect the classifications?

The data behind the most recent classification update was compiled before the pandemic. The extent to which the rankings and groupings will change as a result of coronavirus-related disruption is as yet unclear. But in its June 2020 Global Economic Prospects report, the World Bank spells out how deep some of the effects may run.

“COVID-19 has triggered a global crisis like no other,” the report states. “A global health crisis that, in addition to an enormous human toll, is leading to the deepest global recession since the Second World War.”

world bank economics global economies money gdp income per capita forecasts coronavirus coivd
The impact of the pandemic on low-income countries (LIC). Image: World Bank

Developed and emerging economies alike will suffer, the Bank says. While some countries are seeing upticks in economic activity in the wake of easing lockdown restrictions, the Bank cautions that longer-term damage has also been done.

“Beyond its short-term impact, deep recessions triggered by the pandemic are likely to leave lasting scars through multiple channels, including lower investment; erosion of the human capital of the unemployed; and a retreat from global trade and supply linkages.”

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