The World Bank has downgraded Sri Lanka from an upper middle income country to a lower middle income country. This is due to factors such as the sharp fall in flexible exchange rates or the real value of the currency and the decline in Sri Lanka’s per capita income in a situation where growth rates have been lower than inflation.
It is noteworthy that a year after the World Bank classified Sri Lanka’s economy in a step higher position, now it falls into the same lower category where it was .
These classifications are updated on 1st of July yearly and the latest update is based on the income level of each economic unit for the years 2020-2021. It is determined on the per capita gross national income of a given country or economic unit (population over 30,000) relative to the current US dollar.
World Bank classifies world economies into four categories, according to the per capita income (per annum) of each economy. Those are (i) low-income economy, (less than $ 1,036) (ii) lower middle-income economy, ($ 1,036 – 4,045) (iii) upper-middle-income economy, (Between $ 4,046 – 12,535) and (iv) High Income economy (over $ 12,535).
Sri Lanka has been classified as an upper middle income economy last year (July 1, 2019) and this year (July 01, 2020) graded as a lower middle income economy. Accordingly, the World Bank has classified Sri Lanka as a lower middle income country due to the decline in Sri Lanka’s per capita gross national income from US $ 4,060 in last year to US $ 4,020 in this year.
According to the latest World Bank classifications, Sri Lanka is among the ten economies in the world which are placed in the upper class or in the lower class from where they were before. Seven out of these ten economies are rise up and three are downgraded.
Benin is in the low-income category, Indonesia is in the lowest-middle-class, Mauritius is in the lowest-middle-high, Mauritius is in the lowest-middle, Nauru is in the lowest-middle, Nepal is in the lowest-middle, Romania is in the lowest-middle, Tanzania is the lowest-middle. According to the latest classification, three countries are one stepped down, Sri Lanka in to lower middle, Algeria in lower middle and Sudan in to lower.
The World Bank has not yet released the gross national income for the year ending July 2021 due to the Covid 19 epidemic. Currently, the World Bank uses two methods in this classification of the United States, China, the United Kingdom, European countries, and Japan, as well as other countries, but has not made a clear statement on how to make assessments under these new circumstances.