Bridging the Gap: A Closer Look at Middle-Income Countries and Global Development
RP
Last updated 03/19/2024 by
Rasana PanibeEdited by
Summary:
As of 2024, the World Bank defines middle-income countries (MICs) as having a gross national income (GNI) per capita that ranges from $1,136 to $13,845. This classification includes both lower-middle-income and upper-middle-income countries. Understanding the significance and characteristics of MICs is crucial for analyzing global economic growth and stability.
What is a middle-income country (MIC)?
According to the World Bank, middle-income countries (MICs) are defined as economies with a gross national income (GNI) per capita between $1,136 and $13,845 as of 2024. MICs consist of lower-middle-income countries and upper-middle-income countries, both of which are part of the income categories that the World Bank uses to classify economies for operational and analytical purposes.
Key takeaways
- MICs have a GNI per capita between $1,136 and $13,845.
- The World Bank classifies countries for operational purposes related to financial and economic development services.
- MICs play a crucial role in global economic growth and stability.
Understanding middle-income countries (MICs)
The World Bank has historically classified every economy as low-, middle-, or high-income. It now further specifies countries as having low-, lower-middle-, upper-middle-, or high-income economies. The World Bank uses GNI per capita, in current U.S. dollars converted by the Atlas method of a three-year moving average of exchange rates, as the basis for this classification.
It views GNI as a broad measure and the single best indicator of economic capacity and progress. The World Bank used to refer to low-income and middle-income economies as developing economies; in 2016, it chose to drop the term from its vocabulary, citing a lack of specificity. Instead, the World Bank now refers to countries by their region, income, and lending status.
MIC characteristics
Middle-Income Countries (MICs) are characterized by:
- Gross National Income (GNI) per capita
- diverse economic profiles
- substantial population sizes
- regional variation
- urbanization and rural development
- income inequality
- infrastructure challenges
- governance and institutional issues
- access to education and healthcare
- global economic integration
These countries typically fall between low-income and high-income categories, with the World Bank classifying them based on this indicator. They often have substantial populations, varying demographic diversity, and face challenges in urbanization, rural development, income inequality, infrastructure, governance, and human capital development. Understanding these characteristics helps policymakers, economists, and development practitioners tailor strategies to address the unique challenges and opportunities faced by MICs on their path to economic advancement.
Middle income countries (MIC)
Middle-income countries (MICs) are those nations that fall between low-income and high-income categories based on their gross national income (GNI) per capita. These countries generally have moderate to decent economic conditions and a relatively developed infrastructure. Keep in mind that the classification of countries into income groups can change over time due to economic growth or decline. As of my last knowledge update in January 2022, here are a few examples of middle-income countries:
Brazil
Brazil is a large and diverse country in South America with a mixed economy. It has a well-developed industrial sector and is a significant player in the global agricultural market.
China
While China has experienced rapid economic growth and development, it still falls into the middle-income category. It is the world’s most populous country and has become a major player in international trade and technology.
South Africa
South Africa is a middle-income country located at the southern tip of the African continent. It has a diverse economy, rich in natural resources, and plays a crucial role in the African economy.
Mexico
Mexico is a middle-income country in North America with a developing industrial base. It has a significant manufacturing sector and is a major exporter of automobiles and electronics.
Turkey
Turkey, at the crossroads of Europe and Asia, is considered a middle-income country. It has a diverse economy with industries ranging from agriculture to manufacturing and services.
Russia
Russia, the largest country in the world, falls into the middle-income category. It possesses vast natural resources and has a diverse economy, including energy, manufacturing, and technology sectors.
Malaysia
Malaysia, located in Southeast Asia, is a middle-income country with a well-diversified economy. It has a robust industrial sector, including electronics, automotive, and palm oil production.
The significance of MICs
MICs are essential for continued global economic growth and stability. According to the World Bank, sustainable growth and development in MICs have positive spillovers to the rest of the world. Examples are poverty reduction, international financial stability, and global cross-border issues, including climate change, sustainable energy development, food and water security, and international trade.
MICs have a combined population of five billion, or over 75% of the world’s seven billion people, hosting 62% of the world’s economically disadvantaged. Representing about one-third of global GDP, MICs are a major engine of global economic growth.
The significance of middle-income countries (MICs) lies in their crucial role in global economic growth and stability.
Here are key points highlighting their significance:
1. Global economic engine
MICs collectively make up a substantial share of the world’s population and economic activity. They are major contributors to global economic growth, serving as engines that drive prosperity and development on an international scale.
2. Diversity and influence
MICs exhibit significant diversity in terms of region, size, population, and income levels. This diversity ranges from smaller nations like Belize and the Marshall Islands to influential players like the BRICS countries (Brazil, Russia, India, China, and South Africa). China and India alone account for about one-third of the world’s population.
3. Addressing varied challenges
Due to their diverse nature, MICs face a wide array of challenges. Lower-middle-income nations may prioritize providing essential services like water and electricity to their citizens. In contrast, upper-middle-income economies might focus on addressing issues such as corruption and improving governance.
4. Population and poverty impact
MICs host a combined population of over five billion people, representing more than 75% of the world’s total population. Furthermore, they accommodate 62% of the world’s economically disadvantaged individuals. This demographic significance underscores their potential impact on poverty reduction and global development.
5. Contribution to global GDP
Collectively, MICs contribute to approximately one-third of the world’s gross domestic product (GDP). This substantial economic contribution further emphasizes their role as key players in shaping the global economic landscape.
6. Positive Spillover Effects
Sustainable growth and development in MICs have positive spillover effects on the rest of the world. These include poverty reduction, international financial stability, and addressing global cross-border issues such as climate change, sustainable energy development, food and water security, and international trade.
In summary, middle-income countries are not only economically significant but also play a vital role in addressing global challenges and fostering sustainable development. Understanding and supporting the growth of MICs are essential components of promoting a stable and prosperous global economy.
Graduating from lower- to upper-middle income
Countries graduate from one level to another depending on their GNI per capita. According to a June 2023 report by the World Bank, India continued to be a lower-middle-income country and is expected to continue to be so in 2024.
Countries that will move from low-income to lower-middle-income country categories are Guinea and Zambia. Countries moving from lower-middle income to upper-middle income are Indonesia, El Salvador, the West Bank and Gaza, and Jordan. Countries moving from upper-middle income to high income are Guyana and American Samoa.
The bottom line
The World Bank classifies countries based on gross national income (GNI) per capita to better analyze these nations. Middle-income countries are those with a GNI per capita between $1,136 and $13,845. Middle-income countries can be further categorized as lower-middle income and upper-middle income.
Frequently Asked Questions
1. How does the World Bank classify economies?
The World Bank classifies economies based on their gross national income (GNI) per capita. This classification includes low-income, lower-middle-income, upper-middle-income, and high-income categories.
2. Are there specific criteria for a country to move from one income level to another?
Yes, countries move between income levels based on changes in their GNI per capita. The World Bank assesses economic progress, and countries may graduate from low-income to lower-middle-income, lower-middle-income to upper-middle-income, or upper-middle-income to high-income categories.
3. Why did the World Bank stop using the term “developing economies”?
The World Bank discontinued the use of the term “developing economies” in 2016 due to its lack of specificity. Instead, the organization now refers to countries by their region, income, and lending status for a more accurate classification.
4. What are the challenges faced by middle-income countries (MICs)?
MICs are a diverse group, and challenges vary. Lower-middle-income nations might focus on providing essential services, while upper-middle-income economies may grapple with issues like corruption and governance improvement.
5. Is China considered a middle-income country?
Yes, China is considered a middle-income country. Specifically, it falls into the upper-middle-income category according to the World Bank’s classification.
6. What are the spillover effects of sustainable growth in MICs?
Sustainable growth in MICs has positive spillovers globally, contributing to poverty reduction, international financial stability, and addressing cross-border issues like climate change, sustainable energy development, food and water security, and international trade.
7. How does the World Bank support MICs in their economic development?
The World Bank provides operational and analytical services to MICs based on their income classification. This support includes financial and economic development services tailored to the specific needs of each country.
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