The fourteenth edition of the Global Wealth Report was launched this week jointly by Swiss private bank UBS and Credit Suisse. It shows that 2022 was the first year of wealth decline globally since 2008, although this figure masks big differences between regions.
A new Global Wealth Report by Credit Suisse and UBS reveals that total global net private wealth fell by 2.4 per cent in 2022 to $454.4 trillion, compared with a year earlier, with losses heavily concentrated in North America and Europe.
Together, North America and Europe shed $10.9 trillion, the firms said in a statement. Heading the list of losses in market terms in 2022 was the United States, followed by Japan, China, Canada and Australia.
Wealth per adult also declined globally by 3.6 per cent to reach $84,718 per adult, they added. Much of this decline comes from the appreciation of the US dollar against many other currencies. Financial assets contributed most to wealth declines in 2022 while non-financial assets, mostly real estate, stayed resilient, despite rapidly rising interest rates, the report shows.
Asia Pacific recorded losses of $2.1 trillion whilst Latin America is the outlier with a total wealth increase of $2.4 trillion, helped by an average 6 per cent currency appreciation against the US dollar, the firms continued. The largest wealth increases were recorded for Russia, Mexico, India and Brazil.
In terms of wealth per adult, Switzerland continues to top the list followed by the US, Hong Kong SAR, Australia and Denmark, despite sizeable reductions in mean wealth versus 2021. Ranking markets by median wealth puts Belgium in the lead followed by Australia, Hong Kong SAR, New Zealand and Denmark, the firms said.
When looked at in demographic terms, Generation X and Millennials continued to do relatively well in 2022 in the US and Canada but were not immune to the overall wealth reduction. Broken down by race, non-Hispanic Caucasians in the US saw their wealth decrease in 2022, while African-Americans were left almost unscathed by the downturn, the report reveals. In contrast, Hispanics achieved 9.5 per cent growth in 2022, owing to their greater holdings of housing assets compared to financial assets.
Reduction in wealth inequalities
Along with the decline in aggregate wealth, overall wealth inequality also fell in 2022, with the wealth share of the global top 1 per cent falling to 44.5 per cent. The number of millionaires worldwide in terms of the dollar fell by 3.5 million during 2022 to 59.4 million. This figure does not, however, take into account 4.4 million “inflation millionaires” who would no longer qualify if the millionaire threshold were adjusted for inflation in 2022, the report shows.
According to the report’s projections, global wealth will rise by 38 per cent over the next five years, reaching $629 trillion by 2027. Growth by middle-income markets will be the primary driver of global trends. The report estimates wealth per adult to reach $110,270 in 2027 and the number of millionaires to reach 86 million while the number of ultra-high net worth individuals (UHNWIs) is likely to rise to 372,000 individuals.
“This year’s Global Wealth Report reveals valuable insights about the state of our economy and society, as well as the shifting meaning and potential of prosperity. This sweeping analysis of household wealth covers the estimated wealth holdings of 5.4 billion adults around the world and across the wealth spectrum. It looks to future trends, helping us to frame expectations, understand the ever-changing nature of wealth creation, and better conceive of the power of wealth to broadly benefit our society,” Iqbal Khan, president of Global Wealth Management at UBS, said.
“Much of the decline in wealth in 2022 was driven by high inflation and the appreciation of the US dollar against many other currencies. If exchange rates were held constant at 2021 rates, then total wealth would have increased by 3.4 per cent and wealth per adult by 2.2 per cent during 2022,” Anthony Shorrocks, economist and report author, added.
“This is still the slowest increase of wealth at constant exchange rates since 2008. Keeping exchange rates constant but counting the effects of inflation results in a real wealth loss of –2.6 per cent in 2022. Similarly, financial assets contributed most to wealth declines while non-financial assets (mostly real estate) stayed resilient, despite rapidly rising interest rates. But the relative contributions of financial and non-financial assets may reverse in 2023 if house prices decline in response to higher interest rates,” he continued.
“Wealth evolution proved resilient during the COVID-19 era and grew at a record pace during 2021. But inflation, rising interest rates and currency depreciation caused a reversal in 2022,” Nannette Hechler-Fayd’herbe, chief investment officer for the EMEA region and global head of economics and research at Credit Suisse, said.
The Global Wealth Report 2023 covers estimates of the wealth holdings of 5.4 billion adults across approximately 200 markets – from billionaires in the top echelon to the middle and bottom sections of the wealth pyramid, which other studies often overlook.