World Bank Income Classification System Overview

• The World Bank’s income classification system categorizes countries into four groups: low, lower-middle, upper-middle, and high-income countries.

• Each country is assigned to an income group based on its gross national income (GNI) per capita, which is a measure of the average income of a country’s residents, including income earned abroad.

• The World Bank converts these figures into U.S. dollars using exchange rates and places countries in one of four income groups based on specific thresholds.

• The income thresholds were first set in the late 1980s, aligning with the World Bank’s policies for lending money to countries.

• Today, the thresholds are updated yearly to account for inflation, based on a measure of global inflation.

• The classification is absolute, with a country’s placement based only on its GNI per capita, not on how it stacks up relative to other countries.

• Countries can move between income groups over time due to changes in GNI per capita and annual revisions.

• The income groups are defined based on absolute thresholds, not relative cut-offs that change based on other countries’ progress.

• In 2004, 37% of the population lived in low-income countries, which has fallen to less than 10%.