Developing Countries

Developing countries are economies with lower income per person, a larger share of farming and informal work, and less developed infrastructure and public services than developed countries. The group is huge and varied: it runs from very poor states such as Burundi or Afghanistan to large middle-income economies such as India, Brazil, Indonesia and Pakistan, and together it holds most of the world's population.

There is no single official list. The World Bank groups countries by income; the International Monetary Fund (IMF) speaks of "emerging market and developing economies"; the United Nations keeps a formal list of least developed countries; and the World Trade Organization lets members declare their own status. Larger, more financially open developing economies are usually called emerging markets, and the term "Global South" is increasingly used for the group as a whole.

Picture a town still under construction. Some roads are paved and some are dirt; many families farm or run small stalls; power cuts are common; and there are more children than retirees. There is a lot of room to grow, because each new road, school or factory makes a big difference.

That is the basic idea of a developing economy. Incomes are lower, but growth can be faster because the country can copy technology and methods that already work elsewhere. At the same time, money for building is scarce, borrowing tends to be expensive, and shocks such as a drought or a jump in import prices hit harder.

• World Bank income groups. Economies are ranked by gross national income (GNI) per person. For fiscal year 2027, low income means $1,175 or less, lower-middle $1,176 to $4,635 and upper-middle $4,636 to $14,375. Low- and middle-income economies together, known as LMICs, are the usual working definition of "developing". India and Pakistan are both lower-middle income.
• IMF. Its World Economic Outlook splits the world into about 40 advanced economies and the rest, the emerging market and developing economies, using income, export diversification and financial integration.
• UN least developed countries (LDCs). Since 1971 the UN has kept a list of the poorest and most vulnerable states, judged on income, human assets and economic vulnerability and reviewed every three years. Most of the roughly 44 countries on it are in Africa; countries leave ("graduate") once they pass the thresholds, though Bangladesh and Nepal, due to graduate in November 2026, were given a three-year deferral to November 2029 by the UN General Assembly in October 2026.
• WTO self-declaration. Members choose whether to claim developing status, which can bring "special and differential treatment" such as longer implementation periods.
• OECD aid list. The OECD Development Assistance Committee keeps a list of countries eligible for official development assistance, based mainly on World Bank income data.

• Structure. A larger share of workers in agriculture and the informal economy, and often heavy reliance on exports of a few commodities, which exposes budgets to the commodity cycle.
• Young populations. Rapid population growth can become a "demographic dividend" if jobs are created, but also strains schools and labour markets.
• Infrastructure and services gaps. Shortfalls in power, transport, water and health care, which infrastructure investment and public spending aim to close.
• Finance. Shallow domestic capital markets, lower rates of financial inclusion (though mobile money has changed this in parts of Africa and Asia), and dependence on foreign capital. Many governments must borrow in dollars, creating a currency mismatch that turns a depreciation into a debt problem.
• External income. Remittances from migrant workers abroad are a major source of foreign currency for countries such as Pakistan, the Philippines, Egypt and Nepal.

Developing countries finance growth through domestic saving, foreign direct investment, remittances, official aid and borrowing. Concessional loans and grants come from the World Bank's International Development Association, regional development banks and bilateral donors. When external debt becomes unpayable, countries may face sovereign default and debt rescheduling; the G20's Common Framework, launched in 2020, was designed to coordinate such restructurings with both Paris Club creditors and China. In the 1980s and 1990s, lending was often tied to structural adjustment programs.

• Terminology. Critics say "developing" implies every country follows one path toward Western models, and that one label lumps together countries with very different incomes. The World Bank dropped "developing world" as an analytical grouping in 2016, and many writers prefer income groups or "Global South".
• Aid. Economists such as Jeffrey Sachs argue that well-targeted aid can lift countries out of a poverty trap; others, such as William Easterly and Dambisa Moyo, argue that aid can prop up poor governance and that trade, markets and institutions matter more.
• Trade status. Developed countries have objected to large economies such as China claiming developing status at the WTO; developing countries reply that per-person incomes remain far lower and that special treatment offsets historical disadvantages.
• Growth paths. Some countries have moved quickly from low to high income, while many have stalled in the middle-income trap, and resource-rich states may suffer from the resource curse. The role of industrial policy in escaping these traps is widely debated.

• World Bank Country and Lending Groups
• UN DESA: Least Developed Country Category