High Income Status: Chasing a Moving Goal?

 

Based on the latest data published by the World Bank using the Atlas method, Malaysia’s 2025 gross national income (GNI) per capita reached US$12,380. Although Malaysia’s GNI per capita improved by 6.5% last year, it fell short of the 2025 high-income nation status threshold of US$14,375 per capita by a wide margin, which is the threshold used by the World Bank based on 2025 GNI per capita for the financial year July 2026 to end June 2027. 

Thus, our per capita GNI in US dollar terms will still need to grow by 16.1% before we can be classified as a high-income nation and join 87 other nations that have already achieved the status based on the latest classification. As the high-income status threshold seems to increase by a few percent every year, our total GNI per capita will need to improve at a faster pace. As the measurement is in US dollar terms, the other variable that will have an impact on our GNI per capita is the exchange rate itself. For example, Malaysia’s GNI per capita in US dollar terms was also helped by the ringgit’s appreciation as our GNI in local currency terms rose by 4.3% year-on-year to RM1.95 trillion.

 

Source: https://www.wikihow.com

Malaysia’s GNI per capita has been rising at a compounded annual growth rate (CAGR) of 4.1% per annum over the past five years. Malaysia is on the right track in moving up the income threshold, thanks to concerted efforts in raising income and salaries of households and employees. In fact, over the past 25 years, Malaysia’s per capita income grew at a strong 5.2% CAGR, surpassing the 3.9% CAGR in the global high-income threshold. This allowed Malaysia to close the gap between our per capita income and the global threshold for a high-income nation. 

Malaysia came close to surpassing the global threshold for high-income status in 2014, falling just short by US$119 of the World Bank’s threshold of US$10,959 in per capita income. 2014 was also a period when the ringgit was stronger, allowing our per capita income in US dollar terms to grow much faster due to currency gains. 

For context and understanding, the GNI measurement adopted by the World Bank’s Atlas method is based on a three-year average exchange rate, adjusted for inflation based on a country’s inflation rate vis-a-vis developed economies. Hence, the calculated 2025 GNI per capita of US$12,380 is based on a three-year average US dollar-ringgit exchange rate of 4.4727 to arrive at RM58,524 per capita, which is higher than the reported GNI in ringgit terms for 2025 at RM57,200. The difference of 2.3% is likely related to the inflation-adjusted Atlas method used by the World Bank. 

Malaysia’s GNI per capita in US dollar terms would be much higher at US$13,665 if the average US dollar-ringgit exchange rate of 4.2829 for 2025 was used. Based on the current exchange rate, the GNI per capita for last year would have been at US$14,307 – just a whisker away from the high-income threshold of US$14,375. 

Malaysia’s journey towards achieving global recognition as a high-income nation has been a long one. We first entered the current income classification of upper middle-income economy in 1994 and have been stuck there for more than three decades. As the per capita income measurement is in US dollars, the average three-year exchange rate between the dollar and ringgit also makes a significant impact on our per capita income. 

Even assuming a modest 3% growth in the high-income per capita threshold and if Malaysia’s GNI per capita in US dollar terms grows by 5% per annum, it will take us another eight years before we are able to surpass the global threshold. Hence, even on an optimistic assumption, Malaysia will remain stuck in the upper middle-income category up to 2032 and only achieve high-income status by 2033. 

Achieving the high-income status can be said to mean that we have finally “arrived” after decades of being stuck in the upper middle-income category. The reality is that Malaysians remain poor as the median salary is at just RM3,027 per month (as of March 2026) or RM36,324 per year, which is RM20,876 or 36.5% below the GNI per capita level. Over 85% of the Malaysian labour force do not earn enough to fall within the income tax paying bracket. 

Malaysia’s gross domestic product (GDP), when measured on an income basis, shows compensation of employees (CE) remains low at just 33.9%, a marginal 0.3 percentage point increase from 33.6% recorded in 2024. (The target is to raise income share to 40% by 2030). For advanced economies, this accounts for 50% to 60% of GDP. 

Although CE grew by 5.8% in 2025, outpacing the GDP growth of 4.8% at current prices, the growth in CE has not been strong enough. At the current pace of increase, Malaysia’s target to hit CE of 40% by 2030 will be hard to achieve if real wage reforms are not carried out.

The other is income inequality. With a Gini coefficient of 0.39 (in 2024) we need to do much better in income redistribution. Most developed economies show disposable Gini scores of between 0.25 and 0.38. The average for the entire world is between 0.61 and 0.68. So, in that sense, we are better off! 

References:

The long climb to high income, Pankaj C. Kumar, The Star, 01 Aug 2026 

For most, EPF savings may no longer by enough, Alysha Edward, FMT, 3 February 2026