A recent World Bank study reveals that over 100 countries, including China, India, Brazil, and South Africa, face significant challenges in achieving high-income status in the coming decades. The “World Development Report 2024: The Middle Income Trap” provides the first comprehensive roadmap to help these nations overcome the “middle-income trap.”

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Drawing from the past 50 years, the report finds that countries often stall at about 10% of the U.S. GDP per person, roughly $8,000 today. This figure sits within the “middle-income” range as classified by the World Bank. Since 1990, only 34 middle-income economies have transitioned to high-income status, many of which benefited from European Union integration or newfound oil reserves.

As of late 2023, 108 countries fall within the middle-income bracket, with GDP per capita ranging from $1,136 to $13,845. These countries represent 75% of the global population, house two-thirds of people in extreme poverty, produce over 40% of global GDP, and contribute more than 60% of carbon emissions. Today, they face unique challenges such as aging populations, rising protectionism in advanced economies, and the urgent need for energy transition.

Indermit Gill, Chief Economist of the World Bank Group, emphasized, “The battle for global economic prosperity will largely be won or lost in middle-income countries. Many of these nations rely on outdated strategies, either over-investing for too long or prematurely shifting to innovation. A fresh, phased approach is essential.”

The report introduces a “3i strategy” for reaching high-income status. Countries should adopt progressively sophisticated policies based on their development stage. Low-income nations should start with investment-focused policies (1i phase). Upon reaching lower-middle-income status, they should incorporate technology adoption from abroad (2i phase: investment and infusion). Upper-middle-income countries should then balance investment, technology infusion, and innovation (3i phase), pushing the technological frontier.

Somik V. Lall, Director of the 2024 World Development Report, stated, “While the road ahead is challenging, progress is possible with the right balance of creation, preservation, and destruction. Avoiding the pains of reforms and openness will forfeit the gains of sustained growth.”

South Korea exemplifies successful navigation through all three phases. With a per capita income of $1,200 in 1960, it soared to $33,000 by the end of 2023. Initially, South Korea focused on public and private investment, transitioning in the 1970s to adopt foreign technology. Samsung, for example, evolved from a noodle maker to a global tech innovator by licensing technologies from Japanese firms and investing in education to meet new skill demands.

Poland and Chile have followed similar paths. Poland leveraged Western European technologies to boost productivity, while Chile adapted Norwegian salmon farming techniques to become a top salmon exporter.

The World Bank’s report underscores the importance of a dynamic, phased approach to economic growth, offering a detailed strategy for developing nations to break free from the middle-income trap and achieve high-income status.

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