The World Bank has tipped economies to watch out for what it calls the middle-income trap, where economic growth slows down upon attaining a certain status.
This is contained in the Bretton Woods institution’s recent report dubbed ‘The Middle-Income Trap’.
The report indicates that growth in middle-income countries, which are economies with per capita incomes of between $1,136 and $13,845, is often slower than that in countries at other income levels.
It adds that such countries struggle to transition to high-income status as development strategies that served countries well in their low income phase end up yielding diminishing returns.
The World Bank says there is a need for countries at different levels of development to be aware of this trap so as to completely avoid it or to use the proposed ways of escaping it.
“To avoid what’s known as the ‘middle-income trap’, these countries need to follow a two-step process. First, they need not just invest in their economies but also bring in and spread modern technologies from abroad.
“This means updating their industries to become competitive in the global market. Once they do this, they should focus on innovation—creating new ideas and technologies rather than just adopting existing ones,” the report reads.
This is coming at a time Malawi has set an ambitious target to become an inclusively wealthy and self-reliant industrialised upper-middle-income country by the year 2063.
The country’s development plan, Malawi 2063, has industrialisation, urbanisation, agricultural productivity and commercialisation as its main pillars for attaining ambitions embedded therein.
In an interview, Director General of the National Planning Commission Thomas Munthali commended the World Bank while saying that, at the moment, the main focus is to take Malawi out of lower-income status.
“As Malawi, our main pre-occupation at the moment is to graduate into middle income status. Our vision (MW2063) has clearly identified technology and innovation as mechanisms for acceleration and sustainability in the upper middle-income category and beyond,” Munthali said.
In a separate interview, Economics Association of Malawi President Bertha Chikadza said Malawi should not be fearful of getting stuck in the middle-income trap because, economically, countries behave differently.
“Even though we generalise findings, Malawi can charter its own path for economic growth and grow faster than anticipated and surpass countries that seem to be doing better than us. We need only to set our priorities right and do what it takes for us to move forward and grow consistently.
“The good thing about this is that we, as a country, know what to do and how to do it for us to grow substantially and come out of poverty, even surpassing other countries that are stuck in the middle-income trap. What we need is to roll up our sleeves and do what is necessary in all sectors of the economy,” Chikadza said.
Malawi is on course to meeting development goals, as outlined in Malawi 2063 Implementation Plan (MIP-1) strategic interventions, where progress of MIP-1 strategic interventions has been seen at 4 percent.
This is according to the recent annual progress report for 2023-24 published by the NPC.
The report notes, for instance, that, as opposed to the case in 2022, when the implementation rate was at 79 percent, notable progress has been made.
To this end, NPC indicates that the rate of outlined interventions is at 87 percent. Out of the 87 percent, the rate of completed interventions is 4 percent.
According to the report, during the four-year period since implementation of the development blueprint, the country completed 9 percent of interventions on each of pillars 1 and 2.
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