The World Bank evaluates a country’s gross national income per capita to assess their economic performance. The GNI per capita is calculated by dividing a country’s gross national income by its mid-year population. Low-income countries are defined by a GNI per capita under $1,045 per year, while this number falls between $1,045 and $12,746 for middle-income countries. High-income countries have a GNI per capita of $12,746 or higher. These group thresholds, defined in 1989, are adjusted for inflation each year, but they do not necessarily mean that all economies in a given group are developing in the same fashion.

Recent data from The World Bank shows that the number of low-income countries has decreased by about 50% since 1994, from 64 countries to 31. In 1994, 3.1 billion people lived in low-income countries, but that number has since fallen by 80% to 613 million.

These countries have “graduated” from low-income to middle-income through different processes. Countries such as Indonesia and Mongolia have increased growth by discovering or exploiting energy and metal resources, and investing in other natural energy resources. Several European and Central Asian countries, including Armenia and Azerbaijan, experienced recessions in the 1990s, but recent rebounds in growth have brought them over the middle-income threshold. Countries like India and Vietnam have experienced structural, political and economic reforms, while nations such as Pakistan are slowly becoming more peaceful. Other countries have benefitted from debt relief. Overall, these “graduated” countries are now experiencing faster and more stable economic growth.

Currently, all low-income countries except for Afghanistan, Cambodia, Haiti and Nepal are located in Africa. Most have agricultural economies, with agriculture accounting for about 25% of their GDPs, and may struggle with changing climate conditions. Many rely on remittances for promoting consumption and investment. Some lack the necessary healthcare services, which lowers the quality of life and impedes economic growth.

Growth in low-income countries will depend on improvements in public financial management and increased investments in infrastructure. Another important area is education, which opens up opportunities for advancement and is the key to upward mobility for many.

For countries to move up to the middle-income threshold, they will need to improve security and political conditions. Countries currently struggling with conflicts will need to focus on peace-building initiatives. Others will need to invest in fighting disease and improving public healthcare. Currently, the outlook for low-income countries is rather positive, with an expected increase in economic growth after 2015, and in coming years, more and more countries will graduate to middle-income status.

– Jane Harkness

Sources: Global Economic Perspectives, The Guardian, The World Bank 1, The World Bank 2, The World Bank 3
Photo: The Guardian