Upper middle-income: Romania fails to be officially recognized as a developed country this year

Sorin Melenciuc 30/07/2019 | 13:04

Romania has failed in officially being recognized as part of the “high income” world this year, as its gross national income (GNI) per capita in 2018 was slightly below the threshold set by the Word Bank for this status. However, there are still major differences in terms of development between Romania and the Western world.

According to the latest thresholds determined in July 2019 by the World Bank, low-income economies (a politically correct name for “the third world”) are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of USD 1,025 or less in 2018, lower middle-income economies – between USD 1,026 and USD 3,995, upper middle-income economies – between USD 3,996 and USD 12,375, and high-income economies – USD 12,376 or more.

In 2018, Romania, with a GNI per capita of USD 11,290 calculated using the World Bank Atlas method, was still classified as an “upper middle-income economy”.

In 2018, following an economic growth rate of 4.1 percent, Romania’s gross domestic product (GDP) reached a level of RON 944.2 billion, the equivalent of EUR 202.9 billion (around EUR 10,400 per capita) or USD 239.6 billion (USD 12,301 per capita), according to World Bank official data.

For the year 2019, IMF forecasts a level of GDP of RON 1,012 billion, the equivalent of USD 244.2 billion – or around USD 12,500 per capita.

However, GNI per capita, calculated using the World Bank Atlas method, is slightly lower than GDP per capita – in 2018, Romania’s GNI per capita using the World Bank Atlas method was 91.8 percent of GDP per capita (USD 11,290/USD 12,301).

This means Romania has many chances to become officially a “high-income economy” in 2020 or 2021, if it avoids an economic crisis.

According to the latest World Bank report, 80 countries and territories are currently considered as being “high income economies”, including 26 out of 28 European Union member states – with the exception of Bulgaria and Romania.

In July 2019, one country – Argentina – were officially excluded from the “high income” list, being downgraded in the “upper middle-income” list, and no country was upgraded to “high income” status.

Development gap

However, experts say Romania still lags behind not only the rich Western countries, but also most other new Eastern members of the EU.

“Currently, Romania has a 7-10 year development lag over other Central and Eastern European countries like Poland, Slovakia, Hungary, or the Czech Republic (i.e. it needs 7-10 years to reach their current development level) and a 35-year development lag over OECD counties (i.e. it took OECD countries 35 years to develop from Romania’s current development level to their current development level),” the report “Magnet Cities: Migration and Commuting in Romania” recently released by the World Bank points out.

During the last 25 years, Romania managed to catch up with the economies of Brazil and Mexico, according to analysts.

Romania’s growth rate between 1992 and 2016 was 1 percent higher than the average for upper middle-income countries and more than three times the rate for the EU and developed countries.

And compared with the rest of the world, the result was impressive.

“Most impressively, Romania managed to catch up with the economies of Brazil and Mexico, which in 1992 had a GNI per capita that was 3 respectively 4 times as high as that of Romania,” according to the report.

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