Most of the world’s extreme poor live in middle income countries – but not for long

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In the early 1990s, there was a near complete overlap between poor people and poor countries, with more than 9 out of 10 of the world's extreme poor living in low-income countries at the time. If one wanted to target the poorest people in the world, helping exclusively the poorest countries of the world was both necessary and nearly sufficient.

This picture changed over the following two decades, in part driven by the movement in and out of the low-income group of populous countries like China and India where most of the extreme poor lived. China became a lower-middle-income country in the late 1990s and India followed suit 10 years later. This entailed that by 2010, the share of the world's poor living in a low-income country fell to 3 out of 10 people. For the first time on record, most of the world's poor lived in a middle-income country.

The situation has started to revert over the last decade. Almost the entire population of China has moved out of extreme poverty, and extreme poverty in India has declined from about 1 in 2 people in 1990 to under 1 in 10 in 2019. At the same time, low growth, conflict, and fragility has stalled progress in many low-income countries. Combined with more rapid population growth, this means that today about 4 out of 10 of the world's extreme poor live in a low-income country.

It is difficult to say what will happen in the coming years. With the assumption that countries continue to grow as they did in the decade before the pandemic, we can model how extreme poverty rates change while accounting for the fact that some countries will switch income groups based on those growth rates.^[1]Doing so suggests that by the end of the decade, the majority of the world's poor will once again reside in a low-income country.

We can also look at the average poverty rate of the different income groups. The poverty rate of low-income countries is no different from what it was at the turn of the century. By contrast, poverty has fallen from around 20% in lower-middle income countries during most of the 1990s and 2000s to 10% today, while poverty in upper-middle income countries has fallen from 10% around 2000 to 1% today.

What is perhaps even more remarkable is that while 57% of the world's population resided in a low-income country in 1990, only 10% do so today. The number of low-income countries has also dropped, from more than 60 at the turn of the century to less than 30 today. This means that extreme poverty is concentrated in fewer and less populous low-income countries compared to 1990. Whereas targeting low-income countries in 1990 forced one to have an eye on many countries spanning most of the regions of the world, focusing on low-income countries today means focusing on a group of mostly fragile, conflict-ridden, or Sub-Saharan African countries.

Extreme poverty is once again increasingly becoming a phenomenon pertaining to the poorest countries of the world. Ending extreme poverty by 2030 necessitates a particular focus on the two dozen countries that remain low-income, while not losing sight of those populations that remain in poverty in lower-middle income countries.

See the countries belonging to each income group over time here.

The authors gratefully acknowledge financial support from the UK Government through the Data and Evidence for Tackling Extreme Poverty (DEEP) Research Program.