The World Bank Group divides the world’s economies into four income categories: low, lower-middle, upper-middle, and high. These classifications are updated annually on July 1 based on Gross National Income (GNI) per capita from the previous year. The GNI measurements are calculated in US dollars using conversion factors based on the Atlas method, which was introduced in 1989. The World Bank uses these income categories to indicate a country’s level of development, with GNI per capita serving as a widely available indicator of economic capacity.
The classification of countries into income groups has changed significantly since the late 1980s. In 1987, 30% of reporting countries were considered low-income, while 25% were classified as high-income. By 2023, these ratios had shifted dramatically, with only 12% falling into the low-income category and 40% in the high-income category. However, it is important to note that these changes vary greatly across regions.
In some regions, the percentage of countries classified as low-income has decreased significantly over time. For example, in East Asia and Pacific region, there has been a sharp decline in the number of low-income countries since the early 1990s. On the other hand, in Sub-Saharan Africa region, there has been an increase in high-income classifications over time due to rapid economic growth and development.
These changes in income groups reflect the economic growth and development of countries over time. As countries become wealthier and their economies grow more advanced, they are reclassified into higher income brackets. This shows that economic progress can lead to significant improvements in a country’s standard of living and overall wellbeing.