Global wealth drops for first time since 2008 financial crisis

Much of the decline has been driven by appreciation of US dollar, according to UBS and Credit Suisse

The loss of global wealth last year was concentrated in wealthier regions such as North America and Europe. Getty Images

At current nominal exchange rates, global private wealth fell for the first time since the 2008 financial crisis by $11.3 trillion to $454.4 trillion by the end of last year, according to a joint report by Swiss banks UBS and Credit Suisse.

Wealth per adult also recorded the second-largest reduction since 2000, declining by 3.6 per cent to reach $84,718 per adult at the end of last year, the banks said in the Global Wealth Report 2023, which analysed the household wealth of 5.4 billion people.

This year’s Global Wealth Report was brought out jointly by Credit Suisse and UBS for the first time.

Much of the reported decline comes from the appreciation of the US dollar against many other currencies, which caused global wealth to decline by 5.8 per cent, the report found.

If exchange rates are held constant at 2021 levels, then total wealth increased by 3.4 per cent during 2022 and wealth per adult grew by 2.2 per cent.

Financial assets contributed most to wealth declines last year, while non-financial assets (mostly property) stayed resilient, despite rapidly rising interest rates.

“Wealth evolution proved resilient during the Covid-19 era and grew at a record pace during 2021,” said Anthony Shorrocks and James Davies, economists and authors of the report.

“But inflation, rising interest rates and currency depreciation caused a reversal in 2022.”

In 2020, the Covid-19 pandemic tipped the world economy into its worst recession since the Great Depression, forcing countries into lockdowns that led to higher unemployment and reduced salaries.

However, the generous financial support given to households by governments in many advanced countries and monetary support measures introduced by central banks, coupled with lower interest rates and limitations on consumption opportunities, boosted household wealth throughout the world.

The UAE is expected to attract 4,500 new millionaires this year, according to a June report by Henley & Partners, which tracks private wealth and investment migration trends worldwide.

The Emirates was ranked second behind Australia, which is expected to attract the highest inflow of high-net-worth individuals at 5,200, Henley & Partners said in the report, which focused on people with a net worth of $1 million or more.

The number of HNWIs in the UAE is expected to rise 39 per cent by 2026 to more than 228,000, according to a report last year by consultancy Knight Frank.

The loss of global wealth last year was heavily concentrated in wealthier regions such as North America and Europe, which together shed $10.9 trillion, according to UBS and Credit Suisse.

Asia Pacific recorded losses of $2.1 trillion, while Latin America was an outlier with a total wealth increase of $2.4 trillion, helped by an average 6 per cent currency appreciation against the US dollar, the Wealth Report found.

The US topped the list of losses in country terms with $5.9 trillion last year, followed by Japan, China, Canada and Australia, according to the study. The largest wealth increases were recorded for Russia, Mexico, India and Brazil.

Total household wealth amounted to $2.3 trillion in Saudi Arabia and $1.2 trillion in the UAE last year, according to Credit Suisse and UBS.

However, wealth per adult in the UAE (at $152,556) was 68 per cent higher than in Saudi Arabia ($90,975), mostly due to the latter's higher population.

Global wealth inequality also fell in 2022, with the wealth share of the global top 1 per cent falling to 44.5 per cent, the report said.

Globally, millionaires (in dollar terms) declined by 3.5 million during 2022 to 59.4 million.

The ultra-high-net-worth group with wealth above $50 million had 22,490 fewer members than 2021, with North America accounting for 81 per cent of this decline, the report revealed.

“Global wealth is expected to rise by 38 per cent over the next five years, reaching $629 trillion by 2027. Growth by middle-income countries will be the primary driver of global trends,” UBS and Credit Suisse estimated.

“Wealth per adult is estimated to reach $110,270 in 2027 and the number of millionaires to reach 86 million while the number of ultra-high-net-worth individuals is likely to rise to 372,000.”