The Vietnam War Does it Lead to Economic Prosperity World Bank Releases GNI Report Showing Increase in Per Capita Income in Russia and Ukraine
The World Bank has released the country classifications for 2024-2025 based on income levels, and to everyone’s surprise, both Russia and Ukraine, which have been enduring more than two years of conflict, have seen an increase in their Gross National Income (GNI) per capita this year. Are sanctions ineffective? Why are Russia and Ukraine getting wealthier amidst the ongoing conflicts?
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World Bank Gross National Income (GNI) per capita
Russia returns to high-income country status
Increased rebuilding expenditure propels Ukraine to upper-middle income group
Does the increase in per capita GNI benefit the people?
The World Bank Group categorizes the world’s economies into four income groups: low-income, lower-middle-income, upper-middle-income, and high-income. This classification is updated on 1st July each year based on the previous calendar year’s GNI per capita.
The World Bank uses Gross National Income (GNI) per capita, denominated in US dollars, and adjusts for economic growth, inflation, exchange rates, and population growth. The latest published data is as shown in the figures below.
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This year, three countries—Bulgaria, Palau, and Russia—have moved from the upper-middle income to the high-income group, with per capita GNI surpassing $14,006.
According to the report, in 2023, Russia’s economic activity was significantly influenced by increased military-related activities, with trade (+6.8%), finance (+8.7%), and construction (+6.6%) reviving economic growth. These factors led to a 3.6% real GDP growth, 10.9% nominal GDP growth, and an 11.2% increase in GNI as per the World Bank statistics.
The increased trade also suggests that sanctions from Europe and the United States may not have had a significant impact, as Russia has established alternative trade patterns with China and other countries to circumvent the sanctions.
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)
Ukraine has also been upgraded from the lower-middle income group to the upper-middle income group. The report indicates that the economy recovered in 2023 (with actual GDP growth of 5.3%, compared to a decline of 28.8% in 2022) and the population continued to decline (having decreased by over 15% since the invasion). Since the Russian invasion began, the rise in domestic prices for goods and services has further amplified these factors, leading to a substantial 18.5% increase in per capita GNI.
Despite the severe damage to Ukraine’s economy due to the Russian invasion, the actual growth in 2023 was driven by construction activity (24.6%), reflecting a significant increase (52.9%) in investment expenditure to support the post-destruction reconstruction efforts in Ukraine.
However, the decrease in population is also a painful factor as it reduces the denominator.
War is merciless. Although military spending during the war and post-war reconstruction can trigger high investments, the people in the midst of conflict likely cannot feel the joy of income growth. Hopefully, the two-year-long conflict can be resolved soon, allowing civilians to return to normal life.
GNI
World Bank
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Ukraine
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