Knowledge Note

This note considers the most relevant literature and contends that, even if the ‘middle income trap’ is myth, it provides impetus for policy makers to reassess their strategies once the traditional sources of economic growth have diminished. Middle-income countries must find drivers of productivity, innovation, and competitiveness while strengthening the economic fundamentals that foster and stabilize growth. Reaching high-income levels is challenging, with a strong likelihood of growth slowdowns along the way. But stagnation is inevitable, and middle income countries must have patience to manage the transition responsibly, avoid pitfalls, and promote new opportunities.