Understanding World Bank Income Classification

World Bank Income Classification: FAQs

1. Why does the World Bank classify countries by income?

This classification helps researchers, policymakers, and development agencies compare countries in a standard way. It indicates which countries are rich, poor, or in between, using a clear rule.

2. How many income groups are there?

The World Bank classifies countries into four income groups:

• Low income
• Lower-middle income
• Upper-middle income
• High income

3. What is the basis of classification?

The classification is based on Gross National Income (GNI) per capita, which is the total income of a country’s residents divided by its population. This includes income earned both domestically and from abroad.

4. What are the latest income limits for classification?

As per the latest update (in U.S. dollars):

• Low income: $1,135 or less
• Lower-middle income: $1,136 to $4,465
• Upper-middle income: $4,466 to $13,845
• High income: More than $13,845

5. Do these thresholds change every year?

Yes. They are adjusted each July to account for global inflation and currency changes.

6. Can a country move from one income group to another?

Yes. If a country’s GNI per capita rises or falls, it may move up or down the income ladder. Other factors such as economic shocks, conflicts, or updated census data are also considered.

7. Why do some countries move back to lower groups?

Wars, natural disasters, or financial crises can reduce income levels. Countries like Syria and Yemen have experienced downward movement due to conflicts.

8. Are exchange rates used in this calculation?

No. The World Bank converts income data into U.S. dollars using a method that adjusts for price levels across countries, rather than daily exchange rates, to ensure fair comparisons.

9. What are the real-world uses of this classification?

The classification guides global institutions and governments in:

• Lending and aid allocation
• Health and education program planning
• Investment decisions

10. Why has the share of high-income population decreased in recent years?

The share has dropped because some countries previously classified as high income have fallen below the threshold due to slower growth or global crises.