How does the World Bank classify countries

Country classification

international economic Relations

1. Term: Division of countries into different groups on the basis of objectifiable criteria. This process is of great importance to the work of many international organizations.

2. Country classification of the World Bank: The World Bank (IBRD) plays an important role in the country classification; its classifications are adopted by other important organizations (e.g. IMF, OECD) and institutions (e.g. HIPC). The World Bank knows three approaches to country classification:
(1) Geographically,
(2) according to income and
(3) according to the level of indebtedness.

a) The Classification according to income takes place on the basis of the annual gross national income (GNI) in US dollars, whereby not current exchange rates, but estimated purchasing power rates are used for the currency conversion (so-called Atlas method). The countries are divided into four income categories (basis 2007):
(1) Low Income: $ 935 or less;
(2) Lower Middle Income: $ 936 to $ 3,705;
(3) Upper Middle Income: $ 3,706 to $ 11,455;
(4) High Income: more than $ 11,456.

b) The Classification according to the level of indebtednesscomplements the classification according to income. As a rule, it is based on two indicators. Countries are classified as severely indebted if the present value of their debt service exceeds 80 percent of GNI or 220 percent of exports. In the case of countries with medium debt, these indicators are below these thresholds, but exceed the values ​​of 60 percent of GNI or exports. In countries where present value calculations are not possible due to inadequate statistical reporting, debt levels are used instead of present values. In addition, the quotas for ongoing debt servicing or interest payments for exports are then used. All other countries with low or middle income are classified as less indebted.

Federal export credit guarantees

Division of the export markets into risk categories, with which the specific country risks are recorded, for the calculation of the fee. An OECD-uniform seven-level system has been in place since January 1, 1999: countries with very low risks are assigned to category 1 (lowest pay), countries with very high risk to category 7 (highest pay).