The middle-income trap affects the whole world.

According to a report released on August 1st by the World Bank (WB), more than 100 countries could face obstacles on their path from low-income to high-income status 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)

The World Bank emphasizes that as countries become wealthier, most will plateau at around 10% of the US's annual per capita Gross Domestic Product (GDP). This is known as the middle-income trap.

At the end of 2023, 108 countries were considered middle-income countries, with each country having an annual GDP per capita ranging from $1,136 to $13,845.

According to the World Bank report, these 108 countries aspire to become high-income countries within the next 2-3 decades.

Since 1990, only 34 low-income countries have successfully completed this transition, a number 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 in growth continues at the recent trend, most low-income countries could see a significant slowdown between 2024 and 2100.

"One reason for income stagnation in many countries is inappropriate development policies," the World Bank asserted.

According to the report, middle-income countries must adopt a three-pronged approach, focusing not only on domestic investment but also on the adoption of technologies and business models similar to those of more advanced economies .

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

The World Bank also warned of the dangers of protectionism, which can hinder the flow of knowledge to low- and middle-income countries.

"The power of innovation brings new ideas, products, processes, and practices to middle-income countries," the World Bank emphasized.

A stagnant business model also hinders innovation and growth.

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

Growth requires creativity, talent, and skills, all of which can be fostered through effective policy decisions.

The World Bank notes that low-income countries have more limited skilled human resources compared to developed economies, and that these resources are less effectively utilized.

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

These countries account for 40% of global 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