How are the income group thresholds determined?

Economies are currently divided into four income groupings: low, lower-middle, upper-middle, and high, based on GNI per capita (in U.S. dollars, converted from local currency using the Atlas method). Similar groupings had originally been introduced with the World Development Report in the late 1970s, but countries were not classified consistently. “Developing economies” were divided into low income and middle income; OECD membership was used to define “industrial” countries; and other economies were listed as “capital surplus oil exporters” and “centrally planned economies.”

The low-, middle-, and high-income group thresholds were established in 1989 based largely on operational thresholds that had previously been established. The income groupings have no operational implications for the Bank itself, although the methodology used is the same as that used for the classification of economies for operational purposes (i.e., the calculation of GNI per capita, and the adjustment of the thresholds for inflation).

The low-income threshold is based on the operational threshold for “civil works preference,” and the lower-middle income threshold matches a now-discontinued threshold for 17-year IBRD terms. There is no corresponding relationship between the upper-middle income and high-income threshold with the operational categories, but the staff report “Per Capita Income: Estimating Internationally Comparable Numbers,” presented to the Executive Directors in 1989, established an explicit benchmark of $6,000 per capita in 1987 prices. This choice meant that all countries that earlier listings had designated as "industrial" were classified in the high-income category.

These thresholds are updated annually at the beginning of the World Bank's fiscal year (i.e., July 1), with an adjustment for inflation. The current methodology for measuring inflation for this purpose is to use the change in a deflator (the “SDR deflator”) compiled from inflation measures of economies represented in the IMF’s Special Drawing Rights: currently Japan, the United Kingdom, the United States, and the euro area.

Both the GNI per capita estimates and the income thresholds are rounded to the nearest $10; the thresholds are rounded to end with five and the GNI per capita estimate are rounded to end with zero.

Download an Excel file of historical classifications by income.

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