World wealth rose 14 per cent over the last 18 months, and is forecast to grow 50 per cent by 2016 according to a new report, bucking the lackluster global economic climate. 

According to the Global Wealth Report 2011 published today by Switzerland’s Credit Suisse, global wealth will rise by a half by 2016, from $231 trillion today to $345 trillion. Wealth per average adult (defined as assets including property, excluding debt) is predicted to rise to $70,700 by 2016, an increase of 40 per cent on 2011.

The report, which logged information of 4.5 billion adults in 200 countries, forecast that the number of global millionaires will rise by 17 million to reach a total of 47 million by 2016. Emerging economies are expected to catch up with developed nations with a significant increase in the number of millionaires.

“These are times of unprecedented economic change and a radical reconfiguration of the world’s economic order is taking shape. Emerging markets are important drivers of the global recovery and remain the key growth engines of global wealth,” said Osama Abbasi, chief executive officer of Asia-Pacific at the bank.

China is expected to replace Japan as the second wealthiest country, with total household wealth increasing by $18 trillion to reach $39 trillion in 2016, compared to $31 trillion for Japan.

However the US is expected to remain the largest wealth generator in the world, with total household wealth of $82 trillion by 2016. The US and China will be followed by France and Germany, both with $20 trillion.

Emerging markets leapfrog developed peers

The report supported the widespread notion that emerging markets economies are leading global growth, and will overtake many developed ones in five years' time. Other recent wealth-related research, such as that from Merrill Lynch and Capgemini, and Julius Baer, have predicted the same.

Wealth in China and Africa is projected to rise by over 90 per cent to $39 trillion and $5.8 trillion in 2016 respectively, while wealth in India and Brazil is forecast to more than double by 2016 to $8.9 trillion and $9.2 trillion.

Meanwhile, total wealth in China is currently $20 trillion, equivalent to that of the US in 1968. In the next five years, it is projected to reach $39 trillion, a level that the US achieved in 22 years between 1968 and 1990.

“This fast emerging wealth will drive new trends in consumption and investment in Asia. The much higher debt per adult level in Europe versus Asia, together with the much higher wealth growth rate in Asia versus Europe, suggests there may be scope for significant mutual collaboration to help mitigate the euro debt crisis,” said Giles Keating, global head of research for private banking and asset management at the bank.

Developed markets stay richest….for now

But despite the growing prominence of the emerging markets, the richest countries on an average household basis are still the developed regions. 

Switzerland, traditionally a favourite destination for the wealthy on account of its tax regime, is by far the country with the highest average wealth per adult.

In Switzerland, the average adult has $540,000 in assets, up 27 per cent since January 2010. This is partly attributable to currency fluctuations, with the Swiss franc soaring nearly 60 per cent against the dollar between June 2010 and June 2011.

Australia, Norway and France come third, fourth and fifth on list, with between $397,000 and $294,000 of assets per adult as of June 2011. Australia also saw massive growth in wealth of 37 per cent in 18 months, again largely due to the strong Australian dollar.

There are two Asian countries on the top 10 wealth per adult list, and the rest are European. Singapore comes in at number five with average wealth up 32 per cent to $285,000 per adult, while Tokyo is ranked tenth with average adult wealth of $249,000, up 17 per cent in 18 months.

Average adults in the UK are the world's ninth richest, with average wealth of $258,000, up 2.8 per cent on January 2010.

Shifting Demographics

An aging population will also have a bearing on wealth, said the report.

“Increasing life expectancy and longer retirement, aging population and increasing uncertainty about labor earnings and future health costs are all factors that point to an increase in the need for private wealth, which will drive the increase in the wealth-income ratio in emerging markets over time,” said the report.

The report argued that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and debt-income ratio than the mature economies. An aging population would increase demand for financial assets relative to real assets like real estate. The strain that aging population places on public pension systems and other supports for elderly is likely to strengthen calls for private responsibility in preparing for retirement, pointing to a rise in household wealth in the longer term.

“The relationship between wealth and age is likely to have greatest significance in the context of global demographic trends leading to population aging. Average wealth and wealth-income ratio will rise as the population weighting shifts to older groups,” said Credit Suisse.

Also the middle classes are expected to grow substantially. Those with assets between $10,000 and $100,000 per adult, accounting for just under a quarter of adults in 2011, is expected to rise to 31 per cent in 2016. The bank also predicts an increase in the proportion of adults with wealth above $100,000 from 8.8 per cent in 2011 to 10.9 per cent in 2016.