World Bank warns 108 countries are at risk of being stuck in the "middle-income trap"

On August 1, the World Bank released its World Development Report, saying that more than 100 countries - including China, India, Brazil and South Africa - are at risk of being stuck in the "middle-income trap" unless they adopt radical growth strategies for their economies.

The World Bank says emerging market countries will struggle to close the gap in living standards with the US unless they rely less on investment for growth. The lesson of the past 50 years is that as countries have become richer, they have fallen into a “trap” where average per capita income is around 10% of the US level – or $8,000.

World Bank warns 108 countries are at risk of being stuck in the 'middle-income trap'

Since 1990, only 34 middle-income economies have moved to high-income status – with more than a third of them benefiting from integration into the European Union or from previously undiscovered oil reserves. On current trends, it would take China 10 years and India 75 years to reach per capita incomes 25% of those of the US, says Indermit Gill, chief economist at the World Bank.

The battle for global economic prosperity will largely be won or lost by middle-income countries. But too many of these countries have relied on outdated strategies to become advanced economies. They have relied on investment for too long – or they have turned to innovation too soon.

The World Bank recommends a new approach: Focus on investment first; then emphasize the infusion of new technologies from abroad; and finally, adopt a three-pronged strategy that balances investment, infusion, and innovation. With demographic, ecological, and geopolitical pressures mounting, there is no room for error. According to the World Bank, 108 countries will be classified as middle-income countries by the end of 2023, each with an annual per capita income of between $1,136 and $13,845.

Middle-income countries are home to 6 billion people – 75% of the world’s population, with two out of three living in extreme poverty. They generate more than 40% of global gross domestic product, are responsible for more than 60% of carbon emissions, and face far greater challenges than their predecessors in escaping the middle-income trap: rapidly aging populations, rising protectionism in advanced economies, and the need to accelerate the energy transition. The World Bank’s chief economist said it would be difficult for countries to escape the middle-income trap.

The World Bank has proposed a “3i strategy” for countries depending on their stage of development. Low-income countries can focus solely on policies designed to increase investment – ​​stage 1i. When they reach lower-middle-income status, they need to shift and expand their policy mix in stage 2i: Investment and diffusion, which involves adopting foreign technologies and spreading them across the economy. At upper-middle-income, countries should shift again to the final 3i stage: Investment, diffusion, and innovation.

Source: https://congthuong.vn/ngan-hang-the-gioi-canh-bao-108-quoc-gia-co-nguy-co-mac-ket-trong-bay-thu-nhap-trung-binh-336406.html