The World Bank has officially launched the World Development Report. The title for this year’s report, “Middle Income Trap, seeks to shed more light on the factors that tend to hinder growth in a lot of middle income countries across the globe.
Portions of findings of the report, drawing on lessons from the past 50 years, indicate that countries tend to grow wealthier, then they hit a snag or a trap at about 10% of the US GDP per person, the equivalent of about $8,000 today. This figure, according to the World Bank is in the middle of what it classifies as the “middle income” countries.
According to the report, just about 34 middle income countries have been able to make the necessary shift to high income status since 1990. More than a third of these countries that achieved high income status, were either beneficiaries of integration into the European Union, or of previously undiscovered oil.
Delivering the key note address at the launch, Chief Economist of the World Bank Group and Senior Vice President for Development Economics, Indermit Gill, disclosed that growth in middle-income countries is three times more likely to experience a slowdown compared to higher income countries.
At the end of 2023, 108 countries were classified as middle income, each with annual GDP per capita in the range of $1,136 to $13, 845. These countries, according to the World Bank, are home to some six billion people, which constitutes about 75% of the world’s population where two out of every three people live in extreme poverty. This group, as the World Bank opines, generates about 40% of the world’s GDP and contributes about 60% of global carbon emissions. This population stands the risk of not being able to jump cut the middle income trap largely due to aging populations, rising protectionism in advanced economies, and the need to speed up energy transition.
“The battle for global economic prosperity, will largely be won or lost in middle-income countries” Indermit Gill, mentioned during his presentation at the launch of the report on Thursday in Accra. The pervasive challenge to growth, as he mentions, is the application of outmoded strategies to become advanced economies.
Most of these countries, “depend just on investment for too long – they switched prematurely to innovation”, Mr. Gill intimated. He has thus advocated for a new approach or paradigm which combines investments, infusion of new technologies and adoptation of a three-pronged strategy to balance investments, infusion and innovation.
The road to getting out of the trap, he admits, will not be easy. He, however, expressed optimism that it is possible for countries to make progress in these challenging conditions.
