World Bank Income Classification System

Purpose:

• To classify countries based on their Gross National Income (GNI) per capita for policy, research, and comparison purposes.

Classification Groups (2024 thresholds in USD):

1. Low-income: GNI per capita of $1,135 or less

2. Lower-middle income: $1,136 to $4,495

3. Upper-middle income: $4,496 to $13,935

4. High-income: More than $13,935

How It Works:

• GNI per capita includes average income of residents, even income earned abroad.

• GNI is converted from local currencies to U.S. dollars using exchange rates.

• Classifications are absolute, based on fixed thresholds, not relative comparisons.

Updates and Adjustments:

• Income thresholds are updated yearly to adjust for global inflation.

• A country’s classification can change yearly due to:

  • Economic growth or decline

  • Exchange rate shifts

  • Population data revisions

Historical Background:

• Introduced in late 1980s.

• Initially linked to World Bank lending policies (e.g., concessional loans).

• Over time, became a standalone statistical tool, not tied to lending.

Trends Over Time:

• Upward mobility: Most countries have moved up the income ladder due to growth.

• Downward shifts: Some countries, like Syria and Yemen, dropped from lower-middle to low income (2017) due to war/economic crisis.

• Population distribution has changed:

  • In 2004: 37% of the world population was in low-income countries.

  • In 2024: Less than 10% are in low-income; upper-middle income group grew to 35%.

Key Features:

• Absolute measure, not percentile-based.

• Helps in tracking global economic development.

• Shows how income disparities evolve over time.