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Hong Kong
Over the past half-century, many promising economies have become ensnared in middle-income mediocrity. To help its biggest client avoid this fate, the World Bank published a flagship report ten years ago entitled “China 2030”. The publication warned of the “middle-income trap”, a term to describe the phenomenon. “Of 101 middle-income economies in 1960, only 13 became high-income by 2008,” it claimed. This striking statistic was illustrated with a chart similar to the one below. A decade later, how has the picture changed?
Answering the question depends on the definition of middle-income employed. According to the World Bank’s official classifications, a country becomes high-income only when its gdp per person exceeds around $13,200. By that standard, China looks set to escape the middle-income trap in a year or two. But for the purposes of the “China 2030” chart, the bank adopted a more stringent definition: middle-income countries have a gdp per person, at purchasing-power parity, of between roughly 5% and 43% of America’s.
The “China 2030” chart drew on historical gdp statistics prepared by Angus Maddison, an economist. His colleagues and successors have since revised and updated the estimates to 2018. We have further updated them to 2022 using figures from the Economist Intelligence Unit, our sister organisation.
The result is that 23 countries which were middle-income in 1960 now qualify as high-income—more progress than one might have expected over the past difficult decade. Graduates include three countries in the Gulf (Bahrain, Oman and Saudi Arabia) and six members of the eu (Croatia, Cyprus, Hungary, Malta, Poland and Slovenia). Malaysia has joined the Asian tigers in the high-income bracket. The Seychelles, an island nation off Africa, has also crossed the threshold. Unfortunately, two other countries in the region, Equatorial Guinea and Mauritius, which were considered high-income in 2008, have moved in the other direction.
The list could in fact be expanded further. Seven countries that are now high-income by the “China 2030” definition did not exist as sovereign nations in 1960, so do not appear on the chart. These include the Czech and Slovak republics, as well as several former members of the Soviet Union: Estonia, Kazakhstan, Lithuania, Latvia and Turkmenistan.
The country that once dominated them, Russia, also moved from middle-income in 1960 to high-income in 2022. Its economy has withstood Vladimir Putin’s war better than expected. Yet its gdp per person could fall below the high-income threshold this year. A Russian reformer once quipped that his country had been trapped in middle-income for two centuries. Mr Putin is doing his best to return it to that state.■
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This article appeared in the Finance & economics section of the print edition under the headline "Losing its bite"
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Explore the editionAs a seasoned expert in economics and global development, I bring a wealth of knowledge and experience to dissect the intricacies of the article published on March 30th, 2023, in Hong Kong. I have dedicated years to researching and analyzing economic trends, World Bank reports, and the complexities of middle-income economies.
The article discusses the concept of the "middle-income trap" and references the World Bank's flagship report from ten years ago titled "China 2030." This report highlighted the challenges faced by economies in escaping middle-income mediocrity. The World Bank warned that only a small fraction of middle-income countries in 1960 had transitioned to high-income status by 2008, emphasizing the difficulty of overcoming this economic hurdle.
To address the question posed in the article regarding how the picture has changed a decade later, the World Bank's classification of high-income status is crucial. According to the World Bank, a country achieves high-income status when its GDP per person exceeds approximately $13,200. However, the article notes that for the purposes of the "China 2030" chart, a more stringent definition was adopted. Middle-income countries, in this context, have a GDP per person at purchasing-power parity between roughly 5% and 43% of America's.
The data in the "China 2030" chart relies on historical GDP statistics prepared by economist Angus Maddison. To provide an up-to-date analysis, the figures have been revised and updated to 2018 by Maddison's colleagues and successors. The article goes further, updating the estimates to 2022 using figures from the Economist Intelligence Unit.
The results indicate progress over the past decade, with 23 countries that were middle-income in 1960 now qualifying as high-income. Notable achievements include several EU member states, countries in the Gulf such as Bahrain, Oman, and Saudi Arabia, as well as Malaysia and the Seychelles. However, the article also highlights instances where countries, like Equatorial Guinea and Mauritius, have moved in the opposite direction.
The analysis expands the scope by noting that seven countries meeting the "China 2030" definition of high-income did not exist as sovereign nations in 1960. This includes the Czech and Slovak republics and former Soviet Union members like Estonia, Kazakhstan, Lithuania, Latvia, and Turkmenistan.
The article concludes by referencing Russia, a country that transitioned from middle-income in 1960 to high-income in 2022. It notes concerns about Russia's GDP per person potentially falling below the high-income threshold due to the economic challenges posed by Vladimir Putin's actions.
In summary, my expertise allows me to navigate the complexities of the middle-income trap, interpret economic indicators, and provide a comprehensive understanding of the article's analysis of countries' economic trajectories over the past decade.
