Guyana’s oil resources have seen it transition to a ‘high-income economy’, as the World Bank reported that while this country sits with high economy countries many parts of the Caribbean and the region are struggling to raise their income levels.
Among Caricom countries, Jamaica was listed as upper-middle income as was neighbouring Suriname.
“Middle-income countries are in a race against time to raise their income levels. While several have a goal of reaching high-income status, since the 1990s, only 34 of 108 had succeeded at the end of 2023. Five of them – Antigua and Barbuda, Barbados, Guyana, St Kitts and Nevis, and Trinidad and Tobago – are in the Caribbean,” the World Bank yesterday stated in a release.
Pointing to its recently released study, ‘The Middle Income Trap’, the international development organisation said that it provided the first comprehensive roadmap to enable developing countries to escape that trap, as it found that growth in middle-income countries was slower than that in countries at other income levels.
“Drawing on lessons of the past 50 years, the World Development Report 2024: The Middle Income Trap finds that as countries grow wealthier, they usually hit a ‘trap’ at about 10% of annual US GDP per person—the equivalent of $8,000 today. That’s in the middle of the range of what the World Bank classifies as ‘middle-income’ countries,” the World Bank said.
The report said that growth slowdowns occur more frequently in middle-income countries than in low or high-income countries and that development strategies that served countries well in their low-income phase—capital investment, in particular—yield diminishing returns.
“Countries with weaker institutions, and especially those with lower levels of economic and political freedom are susceptible to slowdowns at even lower levels of income,” the report stated.
According to the bank, countries still classified as middle-income at the end of 2023 faced far bigger challenges than their predecessors in escaping the middle-income trap: rapidly ageing populations, rising protectionism in advanced economies, and the need to speed up the energy transition. In the Caribbean, middle-income challenges are further compounded by countries’ vulnerability to shocks, including climate change.
“The battle for global economic prosperity will largely be won or lost in middle-income countries,” the report quoted Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics as saying. “But too many of these countries rely on outmoded strategies to become advanced economies. They depend just on investment for too long—or they switch prematurely to innovation. A fresh approach is needed: first focus on investment; then add an emphasis on infusion of new technologies from abroad; and, finally, adopt a three-pronged strategy that balances investment, infusion, and innovation. With growing demographic, ecological and geopolitical pressures, there is no room for error.”
The report proposed “a “3i strategy” for countries to reach high-income status.
“Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies. Low-income countries can focus solely on policies designed to increase investment—the 1i phase. But once they attain lower-middle-income status, they need to shift gears and expand the policy mix to the 2i phase: investment and infusion, which consists of adopting technologies from abroad and spreading them across the economy. At the upper-middle-income level, countries should shift gears again to the final 3i phase: investment, infusion, and innovation. In the innovation phase, countries no longer merely borrow ideas from the global frontiers of technology—they push the frontier,” it added.
World Bank Director for the Caribbean Lilia Burunciuc believes that Caribbean low and middle-income countries can and should make progress. “Reforms and restructuring will be needed but, we can also learn from those who have transitioned successfully; including those within this region,” Burunciuc was quoted as saying.
