The middle-income trap affects the whole world

According to a report released on August 1 by the World Bank (WB), more than 100 countries may face obstacles on the path from low-income countries to high-income countries in the coming decades.

Beijing's central business district: China is poised to become a high-income country by 2023 and surpass the US' GDP by the end of the decade. (Source: Nikkei Asia)

As countries get richer, most will stagnate at 10% of the US's annual GDP per capita, the World Bank notes. This is known as the middle-income trap.

By the end of 2023, 108 countries will be considered middle-income countries, with each having an annual GDP per capita between $1,136 and $13,845.

According to the WB report, the ambition of these 108 countries is to become high-income countries in the next 2-3 decades.

Since 1990, only 34 low-income countries have succeeded in this transition, a number that the World Bank considers low. Growth slowdowns occur more frequently in low-income countries than in high-income countries.

The bank's estimates suggest that if investment for growth continues at recent trends, most low-income countries could see a significant slowdown between 2024 and 2100.

"One reason why countries stagnate in income is inappropriate development policies," the WB affirmed.

Middle-income countries must take a three-pronged approach, focusing not only on domestic investment but also on adopting technologies and business models like more advanced economies , the report says.

Only when a country successfully invests in and applies technology can it focus on innovation.

The WB also warned of the risks of protectionism, which could hinder the flow of knowledge to low- and middle-income countries.

"Innovation power brings new ideas, products, processes and practices to middle-income countries," the WB emphasized.

An unchanging business model also stifles innovation and growth.

According to the WB, new businesses with new products, production processes or ideas can also fail, a core principle of innovation.

Growth requires innovation, talent and skills, which can be shaped through effective policy decisions.

The WB notes that low-income countries have more limited skilled human resources than developed economies and use them less efficiently.

The WB believes that the middle-income trap affects the whole world, as middle-income countries are home to three-quarters of the population and nearly two-thirds of them are living in extreme poverty.

These countries account for 40% of GDP and nearly two-thirds of global emissions.

Global efforts to end extreme poverty and spread prosperity will depend on whether middle-income countries succeed or fail.

Source: https://baoquocte.vn/world-bank-bay-thu-nhap-trung-binh-tac-dong-den-ca-the-gioi-281096.html