The combined wealth of millionaires in the UAE is set to grow by 4.2 per cent each year to $510 billion (Dh1.87bn) by 2024, depending on the pace of the post-coronavirus recovery, a new report from the Boston Consulting Group found.
UAE millionaires' wealth stood at $400bn last year, having grown by 3.8 per year from 2014, according to the consultancy's Global Wealth 2020: The Future of Wealth Management – A CEO Agenda study.
It is expected to hit $510bn if there is a slow recovery in the economy, grow by 5.3 per cent to $530bn if there is a quick rebound and increase by 3.2 per cent to $480bn if there is lasting damage.
“Despite the current economic decline and precarious outlook globally for the coming years, estimates indicate [that] the UAE will still record sustainable growth across several areas within the wealth segment,” said Mustafa Bosca, managing director and partner at BCG.
“There is a big uncertainty facing all business leaders around the world and to understand the impact, we created three scenarios – a quick rebound, a slow recovery or lasting damage.
“What we see is that wealth creation will come back despite some short-term challenges in the next 12 to 18 months and $100bn to $400bn of personal wealth will be created in the GCC by 2024 depending on the post-Covid-19 rebound.”
About half of the country’s wealth was held by millionaires in 2019, the consultancy said, representing 7.1 per cent of the personal wealth pool in the Middle East and Africa.
UAE wealth is about 20 per cent of GCC wealth, which currently stands at $2 trillion and is expected to grow by $2.1tn to $2.4tn by 2024 depending on the economic recovery.
However, the global economy has this year struggled with the effects of the virus, which has killed more than 600,000 people worldwide and infected more than 14.5 million, according to Johns Hopkins University, which tracks the outbreak.
The IMF projects that the global economy will shrink by 4.9 per cent this year, pushing it into its deepest recession since the Great Depression, before making a sluggish recovery next year.
The fund forecast a cumulative loss to the world economy of more than $12tn (Dh44tn) in 2020 and 2021 due to the fallout from the pandemic.
A June report from Oliver Wyman and Morgan Stanley found that global high net-worth wealth will decline by 4 per cent, or $3.1tn (Dh11.38tn), this year. Oliver Wyman said the pandemic will account for roughly one lost year of wealth accumulation.
Life insurance and pensions are set to grow at their fastest pace in the Emirates at 7.1 per cent until 2024, a shift from earlier years when currency and deposits represented the country’s largest onshore asset class, accounting for 69.2 per cent of total personal wealth in 2019, according to BCG.
Wealth management providers will probably face more pressure, regardless of the post-coronavirus recovery, as they were already in challenging positions before the pandemic started, BCG said.
“Client needs and expectations are changing at an accelerated pace, competition is intensifying and cost-to-income ratios have been significantly higher than [before] the previous financial crisis – 77 per cent in 2018 compared with 60 per cent in 2007,” the report said.
While some wealth management providers have adapted their businesses, chief executives have been urged to treat 2020 as a pivotal point and ensure their companies protect profits by streamlining processes, recruiting top talent, developing more personalised propositions – such as enhanced environmental, social and corporate governance investment and impact-investing offerings – and adopting new technology.
“Difficult times are undoubtedly ahead, and measures must be taken, so they are able to navigate through the impending period,” Mr Bosca said.