Where did the World Bank's surprising numbers come from?

Ukraine, according to the World Bank classification, in 2024 moved from the category of countries with lower middle incomes to the group of countries with upper middle incomes. According to the World Bank, each Ukrainian accounts for more than $5,000 in annual national income, which does not fit well with data on the real standard of living of our citizens.

From 2024, the World Bank considers Ukraine an upper-middle-income country. Before this, Ukraine was defined by the World Bank as a country with lower-middle income.

According to a report on the World Bank website, Ukraine's income now amounts to $5,070 per capita. Previously they were at $4,270.

5070 dollars is approximately 205 thousand hryvnia. A month comes out to just over 17 thousand hryvnia. In this regard, a logical question arises: where did such figures come from?

The World Bank counted Ukrainians

The World Bank bases its estimates on gross national income (GNI) per capita for the previous calendar year.

For most countries in the world, GNI is actually equal to GDP - gross domestic product. At the same time, the GNI per capita index is one of the basic ones in international statistics, by which the level of well-being in the state is assessed.

“The change in Ukraine's rating came as a result of renewed economic growth in 2023 (real GDP grew by 5.3% after falling 28.8% in 2022) along with a continuing decline in the population, which fell by more than 15% after the Russian invasion ", the World Bank said in a statement.

At the same time, the World Bank does not indicate the GNI indicator (as well as GDP), the population of Ukraine, or GNI per capita in its release.

“This figure ($5,070) is very surprising,” notes Taras Kozak, founder of the Univer investment group, in a conversation with the publication. “If we can estimate GDP (or GNI, which is actually the same thing - “Apostrophe”), then we cannot estimate the population in Ukraine.”

Ukraine's nominal GDP in 2023 amounted to more than 6.5 trillion hryvnia. As for the population, the most realistic figure seems to be 31 million people. And it seems that the World Bank based its calculations on this very basis (if 6.5 trillion hryvnia of GDP is divided by 205 thousand hryvnia of per capita income, we get 31.7 million people).

Income is not for everyone

Thus, we have become closer to understanding how the World Bank calculated the income of Ukrainians. But not everyone has income.

“If we recalculate the average salary (in the first quarter of 2024 it was 18.9 thousand hryvnia per month and is close to the World Bank indicator of average monthly income per capita of 17 thousand hryvnia - “Apostrophe”), then we must understand that this only applies to those who receive a salary,” says Taras Kozak. “And there are also pensioners who have much less income, there are a significant number of young Ukrainians who have no income at all.”

There are about 10 million pensioners in Ukraine (at least according to official statistics), while the average pension today is slightly more than 5,000 hryvnia per month. There are approximately the same number of children in our country. Thus, if we proceed from the total population of a little over 30 million, there are also about 10 million people left, who receive an average of about 20 thousand hryvnia (all the figures given are quite arbitrary).

If we take into account all these categories of the population, it turns out that the average monthly income of a Ukrainian is just over 8 thousand hryvnia or about 100 thousand hryvnia per year. That is, two times less than calculated by the World Bank.

You can calculate it another way. If, according to the WB, income per person in Ukraine is 17 thousand hryvnia, then, in this case, for a family of four it should be at the level of 68 thousand hryvnia. If there are two children in a family, and both parents work and receive an average salary, the family will not even get close to that kind of income. This is not to mention more typical families, in which salaries are usually below average.

It's all about the methodology

In this case, it is not clear why such studies are needed, the data of which, to put it mildly, do not correspond to reality?

In fact, it’s all about the methodology, explains Ilya Neskhodovsky, head of the analytical department of the ANTS network.

“The correct way to put it is that there is $5,000 of gross national income per person. This is precisely where a certain misunderstanding lies,” the expert said in a commentary to Apostrophe. — Gross national income is not only wages. This includes taxes paid and profits received by companies.”

He also pointed out that Ukraine is now receiving significant financial assistance from foreign partners, which last year alone amounted to more than $56 billion, of which $42 billion went directly to the budget. And this helps to maintain the exchange rate of the hryvnia, which in the absence of such assistance would be much lower, and, accordingly, per capita income in dollar equivalent would also be significantly less than $5,070.

“In addition, a significant part of this financial assistance goes to pay wages to state employees, who, upon receiving it, go to the store and buy groceries and thereby also increase the volume of gross national income,” Neskhodovsky added.

And, finally, you need to understand that even in peacetime, GNI/GDP is far from just the real income of citizens, since there are funds that are spent on social infrastructure, the administrative apparatus, and so on. And now, during the war, in fact half of the budget is allocated to defense needs.

“A significant part of the funds goes to the army, so we don’t feel like we have $5,000 per person because of the war,” the expert explained.

Objectivity is in question

However, this does not mean that the World Bank data is objective.

“This is a distorted indicator, which suggests that this approach is definitely incorrect for countries that are at war,” says Ilya Neskhodovsky. “It can be used, for example, for the countries of the European Union, because they have approximately the same conditions, and therefore it is possible to objectively assess how rich a particular country is.”

He recalled that the World Bank used to annually publish rankings of countries around the world based on the level of ease of doing business (Doing Business), but due to the imperfection of the methodology used in this ranking, it abandoned this project several years ago.

Thus, the published data of the World Bank should be, as they say, “taken into account.”

However, you shouldn’t completely dismiss them either.

“This indicator is formal. But the dynamics of this indicator are important. And, apparently, this is precisely the dynamics that the World Bank is talking about,” explains Taras Kozak. — Should we be proud that we are now among the countries with upper-middle incomes? There's nothing to be particularly proud of here. There is also an unpleasant comparison with an aggressor country (the World Bank transferred Russia to the category of countries with high incomes - “Apostrophe”). Therefore, we must move into the category of high-income countries as soon as possible. But the fact that we have moved from the “below average” to “above average” category, especially in the conditions of Russian aggression, is a pleasant fact. I wouldn’t draw big conclusions from this, but it is a fact that Ukraine is developing, no matter what.”