Global wealth is expected to rebound by roughly 5 per cent to reach $267 trillion in 2023 after facing economic headwinds in 2022, a report by the Boston Consulting Group has said.
The UAE’s wealth is projected to grow at a compound annual rate of 5.5 per cent to $1.3 trillion, from $1 trillion, between 2022 and 2027, the management consultancy said on Tuesday.
Last year's bear market followed a strong 2021, during which global wealth rose by more than 10 per cent to $264 trillion, BCG’s Global Wealth Report 2023: Resetting the Course report said.
Contributing factors for this year's wealth rebound include an improving macroeconomic outlook, China's economic reopening, a rebound in stock markets and growth in the Middle East, the report said.
“In 2022, the decrease in global financial wealth was driven by equity markets, geopolitical tensions, rising inflation and interest rates,” said Markus Massi, managing director and senior partner at BCG.
“Yet, in 2022, the GCC and UAE financial wealth outperformed the market by growing by 8 per cent, driven by steadily high oil and gas prices, strong initial public offering listings driven by government-related entities and a major influx of new millionaires and high-net-worth individuals to the region, in general, and the UAE, in specific.”
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 limits on consumption opportunities, boosted household wealth throughout the world.
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 the Global Wealth Report 2023 by Swiss banks UBS and Credit Suisse last month.
However, global financial wealth is expected to grow at a compound annual rate of 5.3 per cent to $329 trillion by the end of 2027, BCG said.
This will be driven by macroeconomic growth, the creation of new millionaires in different countries and the continued growth of “generational money” where inherited wealth will be passed down, Mr Massi said.
Growth in financial wealth in emerging markets is expected to outperform developed markets until 2027, Mr Massi said.
“In the GCC, the UAE’s financial wealth was worth $1.2 trillion in 2022, followed by Saudi Arabia with $1.1 trillion and Qatar at $302 billion, and the growth rates are very favourable for these countries based on positive macroeconomic tailwinds, especially government-sponsored projects, high and steady oil and gas prices and the influx of millionaires,” he said.
Equities and investment funds in the UAE continued to account for 58 per cent of total personal wealth in 2022, while bonds are expected to grow the fastest at a compound annual rate of 8.4 per cent between 2022 and 2027, BCG estimated.
Life insurance and pensions are set to become the third-largest asset class by 2027.
“Representing 13.2 per cent of the Middle East and Africa’s financial wealth in 2022 and growing at a rate of 6.5 per cent per annum from 2017 to reach $1 trillion in 2022, the UAE’s trajectory signals the country’s strong position as one of the preferred global destinations for the wealthy,” said Mohammad Khan, managing director and partner at BCG.
In 2022, 26 per cent of the UAE’s financial wealth originated from ultra-high-net-worth individuals worth more than $100 million.
People with a net worth of between $1 million and $20 million represented 32 per cent of the UAE’s wealth during the same year but this is expected to grow to 34 per cent in 2027, the BCG study found.
Real assets in the UAE grew by 7.5 per cent annually to $1.9 trillion from 2017 to 2022, and are projected to increase by 6.9 per cent per annum to $2.6 trillion by 2027, the report said.