Some of you have asked about countries poised for significant growth by 2030.
While some may disagree with my guesses, I am trying to map reality with these predictions. I will be benchmarking myself every year against the World Bank data updated annually, every July, to hold myself accountable. That way we will know if I am directionally correct or not.
Some countries demote over time and some countries graduate over time. If I say your preferred country won’t graduate an income classification by 2030, that doesn't imply stagnation, just a slower pace of improvement. It is notoriously hard for countries to become high income. It’s called the “middle income trap”.
I’ll predict every country that isn’t already considered high income. So I am not predicting America, UK, or UAE. I am predicting countries like China, India, Nigeria, and Vietnam. If you’d like, I can do a prediction for high income countries too.
Ok, so I am going to use World Bank income classifications, since that’s the closest thing we have to an “Economic Development Bible”, despite its flaws.
For those who don’t know, there are four classifications: low income, lower-middle income, upper-middle income and high income.
For instance, low income signifies an average yearly income of less than $1,136 in 2022 money, or less than $3.11 a day, encompassing countries like Afghanistan, Democratic Republic of Congo, and North Korea.
Lower-middle income covers individuals earning between $1,136 and $4,465 annually, including countries like Ghana, Bangladesh, and the Philippines.
Upper-middle income refers to those earning between $4,466 and $13,845 yearly, often including “2nd World” nations like Argentina, Brazil, Russia, China, South Africa, Mexico, and Indonesia.
High income denotes an average yearly income of $13,845 or more, encompassing countries like the United States, European nations, advanced East Asian countries, as well as wealthy Gulf States and Caribbean hubs like the Bahamas and Oman.
The minimum income thresholds for each income classification increase annually due to inflation. For instance, the current threshold for low-income status is $1,146 a year based on 2022 prices, but with an assumed average inflation rate of 2.5% until 2030, the projected threshold for lower-middle income status by then would be approximately $1,396.29. The minimum upper-middle income threshold updates to $5429.20, and the high income threshold is at least $16,844.42 by 2030.
Now, looking ahead to countries I anticipate evolving by 2030:
Graduate from low-income to lower-middle income:
Background:
Roughly half of African countries are low income, and some other states like Afghanistan and North Korea. Syria and Yemen used to be lower-middle income, but the Arab Spring and the civil wars messed up these countries to low-income status by the mid 2010s.
From 2010 to 2020, there were a couple countries that evolved from low income to lower middle income. Tanzania, is a great example that evolved from low income to lower-middle income in 2014.
Kenya, Bangladesh, Burma, and Tajikistan all graduated in 2015. Senegal graduated in 2018, Benin graduated in 2019, and Nepal graduated in 2020. Large chunks of African and Asian countries evolved to lower-middle status by this time.
When a country moves from low income to lower-middle income, it gains greater access to international credit markets, allowing it to borrow from investors with fewer conditions. Before when the country was low income, it mainly relied on foreign borrowing from multilateral institutions like the World Bank or Islamic Development/Asian Development/African Development Bank. Hitting a higher income status means more access to capital & investors. However, the flip side is the country also loses some of its “kid gloves”.
The newly lower-middle income country becomes ineligible for international support measures for least developed countries (LDCs) such as concessional (below market interest rate) loans and preferential market access. The classification criteria from low income to lower middle income is designed by the World Bank to separate countries that receive these “kid’s gloves” from countries that are restricted to seeking only commercial loans at market interest rates.
By 2030, I believe only Rwanda and Ethiopia will transition from low income to lower middle income. Some of you are probably shocked by me saying Ethiopia will graduate due to all of its many external conflicts (The Somaliland deal, The Egypt-Ethiopia Dam, Tigray, Oromo, and Amhara). The fact is Ethiopia has been growing fast despite these issues, simply from figuring out how to more productive to graduate from subsistence farming, which is a low hanging fruit for inclusive growth. As mentioned, Ethiopia has already surpassed most of Africa, in farming productivity from one of the worst on earth to better than most of Africa. They still have low-hanging fruit to take care of like getting more agricultural inputs, more tractor usage, more irrigation, and enhanced management techniques. Simply doing these basic things for the farmers has been and will continue to increase growth, despite all five of these issues (Some of which are dying down by the way).
From Lower-middle income to upper-middle income:
Lower-middle income countries are mainly African countries, non-oil Middle Eastern & Central Asian countries, most of South Asia, and the poorer parts of Southeast Asia.
In case you are curious of examples that have already graduated recently.
In 2023, El Salvador, under Nayib Bukele, graduated from lower-middle income to upper middle income.
Other examples are Indonesia in 2023.
For countries I think will graduate by 2030, I expect the following:
In Africa & Middle East: Egypt
In South Asia: Bangladesh
In East Asia: Bhutan, Mongolia
In Southeast Asia: Vietnam
From Upper Middle Income to High Income
Upper-Middle Income countries are still poor by Western Standards. These are “2nd World countries” which include most of Latin America, South Africa, Russia, China, Thailand, and Malaysia.
In case you want to see examples of countries that graduated to high income. In 2023, we had Guyana.
Guyana in 2023, was reclassified to a high income country due to its significant oil exports. Guyana is basically a Gulf State in the Americas. It doesn’t have world-beating industries, it is just a rentier state funded by oil. Similarity, Panama became high income in 2021 though also being a rentier state. But in a different way - the Panama Canal. If we want to go more back in time, Antigua became a high income country in 2013, through becoming a rentier state via tourism and offshore financial services. Other Caribbean examples include Barbados and St. Kitts in 2015.
For those who don’t know what a “rentier state” means. It a term to describe a nation whose economy is heavily dependent on receive a massive amount of an “external rent collection” which can be oil, tourism, or port fees.
Chile and Uruguay became high income in 2012 mainly due to services, commodities, and farming and never really developed its own manufacturing powerhouses like Samsung or TSMC like South Korea or Taiwan.
In terms of my predictions of high income nations by 2030, here are my predictions:
In Europe: Bulgaria
In Middle East: Turkey
In Caribbean: St. Lucia
In East Asia: China
In Latin America: Costa Rica
Concluding notes
If you noticed, I didn’t say anything about some big economies like Brazil, Russia, Iran, South Africa, Saudi Arabia, Democratic Republic of Congo, and Nigeria. Why? These economies are mainly commodity exporters that thrive or stagnate based on the price of the raw material they export. We are almost half way through the 2020s, and we haven’t been seeing big commodity price swings so far except gold and cocoa. Even with these price swings, I am not expecting Ghana or Ivory Coast to upgrade to upper-middle income status by 2030 because I have no idea how long this boom will last. These prices could crash by 2028 for all I know, and then these economies’ growth would then be stalled.
For low income countries, I expect Ethiopia and Rwanda will graduate to lower-middle income by 2030 at the latest.
For lower-middle income countries, this will be an Asian decade, as I expect Bangladesh, Bhutan, Mongolia, and Vietnam to become upper-middle income countries. I also expect Egypt to upgrade upper-middle income, simply because Egypt is almost there already, and UAE saved Egypt from bankruptcy by providing the country $35B.
For upper-middle income countries becoming high income countries, I expect America to be scared to death when they see that China becomes a high income country before 2030. I don’t expect China to collapse and I find Peter Zeihan’s arguments for China’s collapse unconvincing for many reasons.
In Europe, I expect Bulgaria to be high income before 2030, simply because its almost there and its in the European Union.
In the middle east, Turkey will be a high income nation simply because it has successfully grown through exporting more advanced manufacturing goods every decade. In 2002, Turkey mainly sold clothes, cars, and video displays. By 2012, Turkey started exporting way more metal products, refined petrol, and delivery trucks, while expanding everything else I mentioned in 2002. Now in 2022, Turkey has expanded to also selling household appliances, plastics, and petrochemicals. I expect by 2030, Turkish firms will get into consumer electronics and more high end electronics (like drones).
St. Lucia will become a high income country following the same rentier state strategy other Caribbean countries have followed - tourism, offshore finance, and fishing.
As for Costa Rica, my girlfriend just traveled there. She told me it is no longer a banana, cocoa, and mango country anymore. Now I know that Costa Rica’s biggest export is medical instruments and orthopedic appliances. Baxter, Allergan, Boston Scientific, Hologic, and Medtronic all have offices in Costa Rica. Costa Rica made an investment promotion agency called CINDE to get American investment. These firms chose Costa Rica simply because of Costa Rica’s educated labor force, close location to United States, free trade agreement with the US (CAFTA-DR), and neoliberal policies of allowing firms operate in Costa Rica tax free for a number of years. This FDI has allowed a technological spillover affect where ambitious Costa Ricans can quit their jobs at these multinationals after a number of years and make their own domestic firms to compete. Costa Rica now has domestic firms like Orbicor (which is now Arenal Medical, and has re-domiciled to United States). The firm makes medical devices to help people detect peripheral arterial disease.
Part of why I do this Substack hobby is because I like reading and traveling to countries to see how other countries develop (or not develop). There’s multiple ways to skin a cat, and multiple strategies to develop - from “rent collection”, to neoliberalism, to export based industrialization.
Thanks for these posts. They provide a basis for understanding the world a little better through an economic lens.
Great Article and overall analysis. Thanks for sharing Yaw