Is it reversal of fortunes for record high wealth?
The Credit Suisse Research Institute released the 8th edition of its Global Wealth Report in November. Referring to the early years of this century as the most broad-based spell of wealth creation in recent history, the report takes a picture from today’s wealth distribution with a 2022 projection. Is it a reversal of fortunes?
The report states that the development at the turn of the century was notable for the breadth of its geographic coverage, with emerging market economies – most notably China and India – not just sharing in the growth, but leading much of the action. And it was also broad in its coverage of assets, with both financial and non-financial assets showing strong real growth rates, according to the report. Appreciating the social impact of the era, with all levels of society benefiting from the economic rewards, the report states: “While global mean wealth per adult grew at 7% per year between 2000 and 2007, the bottom half of wealth holders did even better, so that median wealth per adult grew almost twice as fast, at 12% per year.”
Then the fortune reversed and the global financial crisis put an end to this remarkable period. In the post-crisis period, the source
of wealth growth tilted heavily towards the US, opening a wide gap with Japan and all of Africa, states the report. Furthermore, financial assets grew faster than non-financial assets and much of the rise in financial wealth was due to asset price inflation. “Accordingly across all regions, wealth inequality rose from 2007 to 2016. In every region of the world except for China, median wealth declined,” the report states.
Are we turn ng the corner?
This portrait of wealth creation in recent years was certainly accurate one year ago, but not today, according to the report, where there are hints that we could be reverting to the earlier pattern. That is because in the 12 months
to mid-2017, significant rises in wealth were evident throughout the world, driven not only by robust equity markets, but also by substantial increases in non-financial wealth. Overall aggregate global wealth rose by $16.7 trillion to $280 trillion, up 6.4%, the report finds, which compares favorably with the average rate since 2008.
Wealth growth also outpaced population growth, so that global wealth per adult grew by 4.9%, raising global mean wealth to $56,540 per adult, a new record high. “But inequality has continued to edge upwards, so that despite higher mean wealth per adult, median wealth fell again this year in Africa, Asia-Pacific and Latin America. Our projections for 2022 suggest more pessimistic scenarios for the immediate years ahead,” the report underlines.
Emerg ng econom es to ncrease share
According to the report, emerging markets nearly doubled their share of global wealth from 11% to 19% between 2000 and 2017. The report expects that the pace of wealth generation in emerging economies will continue to be greater than that of developed markets, although this differential will be less striking in the next five years. The share of wealth of emerging markets will likely reach 22% by 2022, increasing their share by 0.4 percentage points on average each year. The annual rate of increase is projected to be 6.5% for emerging markets versus 3.3% for developed markets, the report states.
Ch nese to compr se 40% of global m ddle class n 2022
The report also makes projections for 2022. “The proportion of adults in the lower strata of wealth (less than $10,000) will likely decrease from 70% today to 66% in 2022. The global middle class – those with net worth between $10,000 and $100,000 – is projected to grow by nearly 230 million adults, 40% of whom will be from China, exceeding 1.2 billion adults by 2022,” says the report.
“The aggregate wealth of the middle class will likely grow by around 20%, resulting in a small decline in average wealth per adult. The number of adults in the upper middle segment, which consists of those with wealth between $100,000 and $1 million should grow by 52 million adults, while wealth per adult in this segment could rise by about 3% between 2017 and 2022.”