Which countries will get poorer, richer as Covid-19 grips the world? - ERDAL TANAS KARAGÖL

Which countries will get poorer, richer as Covid-19 grips the world?

Every year on July 1, the World Bank unveils what income group every country falls into, according to gross national income (GNI) per capita, along with which among these states have moved to a higher or lower income group.

As it conducts this grouping, the World Bank classifies countries according to income thresholds it updates and determines every year.

The World Bank groups countries into low-income countries (with GNI income below $ 1,035) and middle-income countries (with GNI income of $ 1,036 - $ 12,535) and high-income countries (GNI per capita higher than $ 12,535).

Since the GNI per capita range determined for the middle income group is very broad, this income group is divided into lower middle income countries (with a GNI income of $ 1,036 - 4.045) and upper middle income countries (GNI between $4,046 – 12,535 per capita.

Countries moving in and out of class income groups

According to classification this year, some have fallen into a lower group because their GNI per capita has decreased, while others have moved to a higher income group.

While Romania, Mauritius and Nauru were considered upper middle-income countries, they entered the league of high-income countries group as their GNI per capita exceeded $12,535. Meanwhile, Indonesia's GNI per capita exceeded $4,045, enabling it to move from the lower middle income group to become upper middle income.

Since Tanzania, Nepal and Benin's GNI per capita exceeded $1,035, they rose from the low income group into the lower middle income class.

Meanwhile, other countries have fallen to a lower income group as their GNI per capita has decreased. Since the GNI per capita of Sri Lanka and Algeria fell below $4,045, they fell from the upper middle income group positions they had occupied last year to become lower middle income.

As for Sudan, it has fallen below $1,035 with a GNI per capita of $590, and thus has become one of the low income countries.

The positions of other countries, such as Turkey, have remained unchanged in the upper-middle income group.

Countries’ standings are set to change even more due to the Covid-19 pandemic

It is expected that the economic contraction caused by Covid-19 will cause significant changes in countries’ GDPs and thus impact their GNI per capita.

In the first half of 2020, factors such as the sharp contraction of global economic growth due to the Covid-19 pandemic, the dramatic decline in trade volume due to imposed restrictions, the collapse of tourism and the return of isolationism will impact GDP and GNI per capita figures all over the world.

Many countries, especially those situated on the fringes of income groups, are likely to change their income groups.

Even vulnerabilities that may occur in underdeveloped and developing countries are expected to impact income groups.

We can predict that the direction of this change will be downgrades of income groups due to the decrease in GNI per capita.

However, it will be possible in this current period to increase GNI per capita for countries that manage to uphold their trade markets and keep exports steady, possess a strong health system, and financially support their manufacturing.

Therefore, while GNI per capita decreases for some countries, it is clear that the other states whose economies are recovering rapidly will manage to increase their GNI per capita and make an important contribution both by rising to a higher income group and decreasing income disparities among countries.

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