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Allianz Global Wealth Report 2020: Wealth Immunity

23 September 2020 Allianz Group

• A bumper year: In 2019, gross financial assets jumped by 9.7% and reached EUR 192 trillion
• Crisis? What crisis?: Global financial assets increased by 1.5% in the first six months of 2020, driven by fast-rising bank deposits
• Trend reversal: The wealth gap between rich and poor countries has widened again
• South Africa: Strong recovery.

Today, Allianz unveiled the eleventh edition of its “Global Wealth Report”, which puts the asset and debt situation of households in almost 60 countries under the microscope.

A bumper year

Never in the last ten years, were we able to report such a big increase in wealth. Worldwide, gross financial assets[1] grew by 9.7% in 2019, clocking the strongest growth since 2005. This performance is astonishing given the fact that 2019 was marred by social unrest, escalating trade conflicts and an industrial recession. But as central banks reversed course and embarked on broad-based monetary easing, stock markets decoupled from fundamentals and soared by 25%, lifting financial assets in the process. The asset class of securities increased by a whopping 13.7% in 2019; never was growth faster in the 21st century. The growth rates of the other two main asset classes were lower – but still impressive. Insurance and pensions reached a plus of 8.1%, mainly reflecting the rise of underlying assets, and bank deposits increased by 6.4%.

All asset classes clocked growth significantly above their long term averages since the Great Financial Crisis (GFC). Another peculiarity of 2019: Through all the years, the regional growth league table used to be dominated by Emerging Markets. Not so in 2019. The regions that saw the fastest growth were by far the richest: North America and Oceania where the gross financial assets of households increased by a record 11.9% each. As a consequence, for the third year in a row, Emerging Markets were not able to outgrow their much richer peers. The catch-up process has stalled.

South Africa: Strong recovery

The gross financial assets of South African households rose by 6.7% in 2019, after declining by almost 4% in the previous year. The increase was, however, still below the average growth of 8.5% since the GFC. Last year’s recovery was mainly driven by the rebound in insurance and pensions as well as in securities, both swinging from -3.4% to 5.0% and from -9.4% to 8.1%, respectively. Growth in bank deposits, on the other hand, continued to be very robust at 8.7%. This asset class, however, remains the least popular in South Africa, its portfolio share is a mere 15.6%, compared with 52% of insurance and pensions and around 30% of securities. Thus, the savings behavior of South African households diverge considerably from that seen in other Emerging Markets where on average bank deposits account for almost half of all financial assets.

The growth of liabilities, on the other hand, slowed down further in 2019, to 4.8% against 6.9% in 2018. Accordingly, the debt ratio (liabilities in % of GDP) remained almost flat at 44.7%, more or less in line with the average in Emerging Markets (42.9%). Just before the GFC, it was still 10 percentage points higher in South Africa and almost three times the average in Emerging Markets at that time. While households in other Emerging Markets – notably in Asia – embarked on a borrowing binge, South African households showed restraint. Net financial assets, finally, increased by 7.4% in 2019, after falling by 7.3% in the previous year. With net financial assets per capita of 7,112 euros, South Africa remained 38th place in the ranking of the richest countries (financial assets per capita, see table for the top 20).

Crisis? What Crisis?

The same story is about to repeat itself in 2020 – but only in extreme. As Covid-19 plunged the world economy to its deepest recession in 100 years, central banks and fiscal authorities around the world fired up unprecedented monetary and fiscal bazookas, shielding households and their financial assets from the consequences of a world in disarray. We estimate that private households have been able to recoup their losses of the first quarter and recorded a slight 1.5% increase in global financial assets by the end of the second quarter 2020 as bank deposits, fueled by generous public support schemes and precautionary savings, increased by a whopping 7.0%. Very likely, private households’ financial assets can end 2020, the year of the pandemic, in the black.

“For the moment, monetary policy saved the day,” said Ludovic Subran, chief economist of Allianz. “But we should not fool ourselves. Zero and negative interest rates are a sweet poison. They undermine wealth accumulation and aggravate social inequality, as asset owners can pocket nice windfall profits. It’s not sustainable. Saving the day is not the same as winning the future. For that, we need more than ever structural reforms post Covid-19 to lay the foundations for more inclusive growth.”

Trend reversal

The wealth gap between rich and poor countries has widened again. In 2000, net financial assets per capita were 87 times higher on average in the Advanced Economies than in the Emerging Markets; by 2016 this ratio had fallen to 19. Since then, it has risen again to 22 in 2019. This reversal of the catching-up process is widespread. For the first time, the number of members of the global wealth middle class has fallen significantly from just over 1 billion people in 2018 to just under 800 million people in 2019.

The rise of Emerging Markets remain impressive

Looking at the development since the turn of the century, however, the rise of Emerging Markets remain impressive. Adjusted for population growth, the global middle wealth class grew by almost 50% and the high wealth class by 30% – while the lower wealth class declined by almost 10%. Despite this progress, the world remains a very unequal place. The richest 10% worldwide – 52 million people in the countries in scope with average net financial assets of EUR 240,000 – together own roughly 84% of total net financial assets in 2019; among them, the richest 1% – with average net financial assets of above EUR 1.2 million – own almost 44%. The development since the turn of the millennium is striking. While the share of the richest decile has fallen by seven percentage points, that of the richest percentile has increased by three percentage points. So the super-rich do indeed seem to be moving further and further away from the rest of society.

“It is quite worrying that the gap between rich and poor countries started to widen again even before Covid-19 hit the world,” commented Michaela Grimm, co-author of the report. “Because the pandemic will very likely increase inequality further, be setback not only to globalization but also disrupting education and health services, particularly in low-income countries. If more and more economies are turning inwards, the world as a whole will be a poorer place.”

Top 20 in 2019 by…

Net financial assets per capita

 

Gross financial assets per capita

 

in EUR

y/y in %

rank 2000

 

 

in EUR

y/y in %

rank 2000

#1 USA

209,524

13.4

2

 

#1 Switzerland

294,535

5.6

1

#2 Switzerland

195,388

7.4

1

 

#2 USA

254,328

11.3

2

#3 Singapore

116,657

12.2

16

 

#3 Denmark

171,248

11.2

7

#4 Netherlands

114,287

18.3

6

 

#4 Netherlands

164,896

12.5

4

#5 Taiwan

110,706

11.7

12

 

#5 Sweden

154,277

14.2

17

#6 Sweden

110,618

18.8

14

 

#6 Singapore

153,642

8.4

10

#7 Japan

103,829

3.9

3

 

#7 Australia

145,150

11.6

16

#8 Denmark

101,671

17.5

13

 

#8 Canada

140,542

8.9

8

#9 Canada

96,630

11.7

8

 

#9 Taiwan

131,832

10.4

14

#10 New Zealand

96,091

4.4

9

 

#10 Japan

127,041

3.5

3

#11 Belgium

94,804

6.8

4

 

#11 New Zealand

125,779

4.7

11

#12 Great Britain

88,136

6.0

5

 

#12 Great Britain

123,136

5.2

6

#13 Australia

83,240

20.4

18

 

#13 Belgium

121,345

6.4

5

#14 Israel

79,794

10.0

11

 

#14 Norway

98,804

5.8

20

#15 France

63,381

10.2

10

 

#15 Israel

98,798

8.7

18

#16 Austria

59,256

6.5

17

 

#16 France

90,691

8.9

12

#17 Italy

57,429

6.2

7

 

#17 Ireland

83,825

9.6

13

#18 Germany

57,097

7.7

19

 

#18 Austria

81,619

5.4

19

#19 Ireland

53,636

17.6

15

 

#19 Germany

79,779

6.7

15

#20 Spain

34,855

8.8

22

 

#20 Italy

73,418

5.4

9

 

 

 

 

 

 

 

 

 

#38 South Africa

7,112

6.0

36

 

#40 South Africa

9,588

5.3

36

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