World Bank Reports Over 100 Countries Stuck in “Middle-Income Trap”
On Thursday, the World Bank highlighted that over 100 countries face the risk of becoming ensnared in the “middle-income trap” unless they implement bold economic strategies. This warning includes major economies such as South Africa, India, Brazil, and China, which could struggle to transition to high-income status in the coming decades.
The World Development Report 2024: The Middle Income Trap reveals that nations typically encounter this trap when their annual GDP per capita reaches about 10% of that of the United States. According to Somik Lall, Senior Advisor to the World Bank Group Chief Economist and Director of the report, the outlook for these countries is concerning.
“Over the past 30 years, only 34 middle-income economies have successfully moved to high-income status, leaving the majority in the middle-income trap,” Lall stated.
The report identifies significant challenges for middle-income countries, including rapidly aging populations, increased protectionism in advanced economies, and the urgent need for energy transition. To help these nations escape the trap, the World Bank proposes a “comprehensive roadmap” featuring a “3i strategy” tailored to each stage of economic development.
For low-income countries, the focus should be on increasing investment, the initial phase of the strategy. As investment returns diminish, countries should advance to the “infusion” phase, where they incorporate global ideas and adapt them locally. In the final phase, “innovation,” upper-middle-income countries should aim to become global leaders and producers.
Lall emphasized that success depends on a society’s ability to balance creation, preservation, and destruction. Countries that avoid necessary reforms and openness may miss out on the benefits of sustained growth.
