World Bank Global Income Shifts 2024-2025

1. Summary

• The analysis of the World Bank's income classifications for 2024-2025 offers a revealing look into the evolving economic landscape based on Gross National Income (GNI) per capita. Since its inception in 1987, this classification has been a crucial tool for assessing economic development across four income categories: low, lower-middle, upper-middle, and high. The study highlights both historical trends and specific regional shifts, illustrating substantial economic transformations. Notably, the percentage of countries classified as low-income has decreased from 30% in 1987 to 12% in 2023, whereas high-income countries have increased from 25% to 40% during the same period. Regional stories vary, with South Asia and Latin America showing remarkable economic growth, while the Middle East and North Africa face unique challenges. Moreover, the report underscores significant country-specific reclassifications, such as Bulgaria, Palau, and Russia ascending to high-income status and the decline of West Bank and Gaza to a lower-middle-income tier due to ongoing conflict-related economic disruptions.

2. Overview of World Bank Income Classifications

• 2-1. Definition of income groups: low, lower-middle, upper-middle, high

• The World Bank Group classifies the world's economies into four income groups: low, lower-middle, upper-middle, and high. This classification reflects a country's level of development and is based on Gross National Income (GNI) per capita. As of 2024-2025, these classifications highlight the economic capacity of nations and are updated annually.

• 2-2. Annual updates based on GNI per capita using Atlas method

• The income classifications are revised every year on July 1, using data from the previous calendar year's GNI per capita, expressed in United States dollars. The conversion to GNI is performed using factors from the Atlas method, which has been in practice since its introduction in 1989. This approach is aimed at providing a reliable measure of economic performance, and reflects broader trends in the global economy.

3. Historical Trends in Income Classification

• 3-1. Changes in classification from 1987 to 2023

• The classification of countries by income level has evolved significantly since 1987. Initially, in 1987, 30% of reporting countries were classified as low-income, while 25% were classified as high-income. By 2023, these figures had changed dramatically, with only 12% of countries classified as low-income and a significant increase to 40% classified as high-income. This shift reflects broader changes in global economic conditions and highlights the dynamic nature of income classifications.

• 3-2. Percentage of countries in each income category over the years

• The distribution of countries across different income categories has varied over time. In 1987, the classification breakdown indicated that a significant proportion of countries were in the low-income category. Notably, in South Asia, 100% of countries were classified as low-income in 1987, but this share dropped to just 13% in 2023. Conversely, in the Middle East and North Africa, the share of low-income countries was 10% in 2023, an increase from 1987 when no countries were classified in this category. In Latin America and the Caribbean, the high-income classification rose from just 9% in 1987 to 44% in 2023. This analysis shows that the changes in income classification are not uniform across regions, varying significantly.

4. Regional Variations in Income Levels

• 4-1. South Asia: Shift from 100% low-income in 1987 to 13% in 2023

• As per the World Bank data, South Asia exhibited a significant transformation in its income classification from 1987 to 2023. In 1987, all countries in South Asia were classified as low-income. By 2023, the proportion of low-income countries in the region dramatically decreased to 13%. This shift illustrates the region's economic progress over the past several decades.

• 4-2. Middle East and North Africa: Increase in low-income countries

• The classification data indicates an increase in the share of low-income countries in the Middle East and North Africa region. In 1987, no countries were classified as low-income within this region. However, by 2023, 10% of the countries in the Middle East and North Africa fell into the low-income category. This reflects the changing economic circumstances of the region.

• 4-3. Latin America and the Caribbean: Growth in high-income countries

• The data from the World Bank highlights a notable increase in the number of high-income countries in Latin America and the Caribbean between 1987 and 2023. In 1987, only 9% of the countries in this region were classified as high-income. By 2023, this figure rose significantly to 44%, showcasing the region’s economic growth and development during this period.

5. Country-Specific Reclassifications for 2024-2025

• 5-1. Countries moving to high-income

• As of 2024-2025, three countries have transitioned from upper-middle-income to high-income status: Bulgaria, Palau, and Russia. Bulgaria's economic growth was sustained with a real GDP increase of 1.8%, primarily supported by consumption demand following the pandemic. Palau also experienced a return to pre-pandemic GDP levels with a real growth of 0.4%. Russia's economic activity was significantly influenced by a surge in military-related activities, amplified by a rebound in trade (increasing by 6.8%), financial sector growth (up by 8.7%), and a boost in construction (rising by 6.6%), resulting in a real GDP increase of 3.6% and a nominal GDP rise of 10.9%. Consequently, Russia’s Atlas GNI per capita grew by 11.2%.

• 5-2. Countries moving to upper-middle-income

• Four countries have moved up from lower-middle-income to upper-middle-income: Algeria, Iran, Mongolia, and Ukraine. Algeria's economy grew by 4.1% in 2023, primarily due to a comprehensive revision of national accounts that resulted in a notable increase in GDP. Iran's economy saw a more substantial growth of 5.0%, driven by oil exports accompanied by significant gains in services and manufacturing, leading to a 39.5% increase in nominal GNI. Mongolia recorded a 7.0% increase in real GDP, with mining expansions boosting its economy by 23.4% and an export increase of 53.4%. Ukraine's economy rebounded with a 5.3% real GDP growth following a severe contraction in 2022, driven by construction activities (up by 24.6%) amid ongoing challenges posed by the conflict, resulting in an 18.5% increase in nominal Atlas GNI per capita.

• 5-3. West Bank and Gaza's downward classification

• West Bank and Gaza experienced a downward change in classification due to the impact of the conflict in the Middle East that began in October 2023. This conflict resulted in a 9.2% drop in nominal GDP and a real terms decrease of 5.5% in the economy during the fourth quarter. Given that West Bank and Gaza was near the upper-middle-income threshold—having only just entered this category the previous year—these declines caused a reclassification back to the lower-middle-income category.

6. Implications of Income Classification Changes

• 6-1. Economic indicators: GDP growth and GNI per capita

• The World Bank classifies countries into four income groups: low, lower-middle, upper-middle, and high, based on Gross National Income (GNI) per capita. The classification updates occur annually on July 1 and reflect the economic capacity of countries, drawing on Atlas GNI per capita figures. Since 1987, the classification system has evolved, with significant movements observed in the income levels of various countries. For instance, in 1987, 30% of reporting nations were classified as low-income; however, this figure has drastically decreased to 12% by 2023. Conversely, the high-income category share rose from 25% in 1987 to 40% in 2023. GNI per capita serves as a critical economic indicator, reflecting shifts in economic performance across multiple regions.

• 6-2. Factors influencing reclassifications: post-pandemic recovery, conflict impacts

• The reclassification of countries is influenced by several factors, notably post-pandemic recovery and conflict-related dynamics. In FY25, three countries transitioned from upper-middle-income to high-income: Bulgaria, Palau, and Russia. Bulgaria showed a steady economic advancement with a 1.8% real GDP growth and a modest recovery in consumption. Palau's GDP returned to pre-pandemic levels with a 0.4% growth. Meanwhile, Russia experienced a notable economic boost attributed to increased military-related activities, coupled with rebounds in trade, the financial sector, and construction. Conversely, the West Bank and Gaza experienced a downward classification due to the conflict in the Middle East that began in October 2023, resulting in a 9.2% drop in nominal GDP. These developments showcase how national and regional economic conditions directly affect the international income classifications established by the World Bank.

Conclusion

• This report provides a comprehensive overview of the shifting global economic status as depicted by the World Bank's income classifications, emphasizing economic performance across various regions. It outlines the significant trends from 1987 to 2023, with crucial increases in high-income nations and reductions in low-income categories. These findings underscore the importance of GNI per capita as a measure of economic growth and development. Key reclassifications reveal the economic gains of countries like Bulgaria, Palau, and Russia, contrasted by the adversities faced by the West Bank and Gaza. While the classifications offer valuable insights for policymakers, there are limitations due to external factors, such as global conflicts and pandemics, affecting economic performance. Future prospects suggest increased importance of adaptive strategies in response to these dynamic global conditions. Insights from the report are crucial for designing targeted policy and development aid that recognize and address the nuanced needs of shifting income classifications globally, accommodating for the varied economic realities across regions.

Glossary

• World Bank [International financial institution]: The World Bank Group is pivotal in providing financial and technical assistance to developing countries, aiming to reduce poverty and support development. Its classifications of countries by income level are vital for understanding economic capacity and development needs globally.

Source Documents

• World Bank country classifications by income level for 2024-2025https://blogs.worldbank.org/en/opendata/world-bank-country-classifications-by-income-level-for-2024-2025
• World Bank country classifications by income level for 2024-2025https://blogs.worldbank.org/en/opendata/world-bank-country-classifications-by-income-level-for-2024-2025