World Bank Income Classification

The World Bank groups economies according to their average income per person. It uses gross national income (GNI) per capita, converted into US dollars through the World Bank Atlas method, to place each economy in one of four income groups.

The income measure used

GNI measures income accruing to an economy's residents, including net primary income received from abroad. Dividing it by population gives an average income measure rather than the income actually received by every individual.

• GNI equals GDP plus net primary income from abroad, such as income from employment and investment received from abroad minus corresponding payments abroad.
• GNI per capita is obtained by dividing GNI by the economy's mid-year population.
• The classification therefore differs from a ranking based on total GDP, which measures the size of domestic production rather than average income.

How the Atlas method works

The Atlas conversion factor converts GNI expressed in national currency into US dollars while reducing the effect of short-term exchange-rate fluctuations.

• The method uses exchange rates for the relevant year and the two preceding years, adjusted for differences between domestic and international inflation.
• Atlas-method GNI in US dollars is divided by population to obtain the per capita figure used for classification.
• This is not a purchasing power parity (PPP) measure, which adjusts for differences in price levels across economies.

Income groups and annual revision

The four groups are low income, lower-middle income, upper-middle income and high income. An economy's Atlas-method GNI per capita is compared with the applicable income thresholds.

• The World Bank updates classifications annually on 1 July, using GNI per capita estimates for the preceding calendar year.
• The income thresholds are adjusted annually for inflation, so fixed dollar cut-offs should not be treated as permanent definitions.
• An economy can change groups when its measured income crosses a revised threshold; exchange-rate movements can influence this outcome.

What the classification can and cannot show

The classification provides a comparable indicator of average income, not a complete assessment of development.

• It does not reveal income inequality, poverty distribution or differences in health and education outcomes.
• Income-group classification is distinct from World Bank lending eligibility, which also involves other criteria, including creditworthiness.