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Credit Suisse: Global household wealth increases 4.9% to USD 241 trillion, marked by a resurgence of wealth in the Eurozone
Wealth of USD 51,600 per adult in the world reaches all-time highThe Credit Suisse Research Institute today released its fourth annual Global Wealth Report 2013, which finds that from mid-2012 to mid-2013 aggregate global household wealth increased by 4.9% in current dollar terms to USD 241 trillion, despite the continuing challenges posed by the economic environment.
North America gained USD 8.4 trillion, an increase of 11.9%, fueled by a recovery in house prices and a bull equity market in the United States. It became the lead region in terms of total net wealth for the first time since 2005, overtaking European holdings, which added USD 5.5 trillion, an increase of 7.7%. As a result of a 22% depreciation of the Japanese yen against the US dollar during the period, household wealth in Japan dropped 20.5% to USD 22.6 trillion, dragging down total wealth in Asia Pacific by 3.7% to USD 73.9 trillion. However, Asia Pacific ex-Japan continued to register stable wealth growth by 6.2% to USD 51.3 trillion in mid-2013.
Key findings of the report include:
- Wealth is to rise by nearly 39% in the next five years, reaching USD 334 trillion by 2018
- Emerging markets are to increase their share of global wealth to 23% by 2018, with China alone expected to represent over 10% of global wealth then
- The US is to remain the undisputed leader in terms of aggregate wealth, with total net worth approaching USD 100 trillion by 2018
- Eurozone wealth per adult in 2013 has recovered more than half of the large loss experienced 12 months earlier, mainly due to rising equity prices
- Switzerland ranks highest in average wealth, breaking the 500,000 USD level to hit a new high of USD 513,000 per adult
- The number of millionaires worldwide is to increase by about 16 million reaching 47 million in 2018
Giles Keating, Global Head of Research for Private Banking & Wealth Management, Credit Suisse, said: “The fourth annual Credit Suisse Global Wealth Report shows a USD 11 trillion rise in wealth to over USD 241 trillion, with the US as the clear winner overtaking Europe and APAC falling back due to the sharp depreciation of the yen. We look at wealth mobility for the first time and it appears surprisingly high. For instance, less than two-thirds of the 2000-01 Forbes billionaires remained on the list by 2005, and barely half were on it by the end of the decade.”
Credit Suisse Research Institute’s Michael O’Sullivan said: “Our research shows that global wealth has doubled since 2000, quite compelling given some of the economic challenges of the last decade. We expect this trend to continue in the foreseeable future, driven largely by Emerging Markets’ strong economic growth and rising population levels.”
Credit Suisse provides the most comprehensive and reliable source of information on global household wealth available. The analysis comprises the wealth holdings of 4.7 billion adults across 200 countries – from billionaires in the top echelon to the middle and bottom sections of the wealth pyramid, which other studies often overlook.
For a copy of the Credit Suisse Research Institute report, “Global Wealth Report 2013,” please visit: http://www.credit-suisse.com/researchinstitute .
Highlights of the Global Wealth Report 2013
Changes in Wealth from 2012-13
Total global household wealth increased in current dollar terms to USD 241 trillion, or USD 51,600 per adult in the world, an all-time high for average net worth.
In recent years, exchange rate movements versus the US dollar have significantly impacted the relative wealth rankings of individual countries. During the year to mid-2013, exchange rates were confined to a narrower range than in the past, therefore, had less impact. Exceptions include Japan, whose currency depreciated by 22%, and Egypt, Argentina and South Africa, which were devalued by more than 15%.
In most other parts of the world, the economic environment has been generally favorable towards wealth acquisition. While Japan’s currency issues led to a net loss for the Asia-Pacific region, gains were recorded in all other regions. Total wealth in North America (up 11.9%) overtook European holdings (up 7.7%) to become the lead region for the first time since 2005 (see Table 1).
Changes in Wealth from 2012-13: Focus on the Eurozone
Credit Suisse in its report details the resurgence of wealth in the Eurozone, with rising equity prices and the slightly favorable euro-dollar movement to recover more than half of the very large wealth loss experienced 12 months earlier.
Wealth per adult was 154,900 euros in mid-2013 for the Eurozone as a whole, but there are significant differences between countries. Credit Suisse estimates indicate that household wealth in Austria, Germany, Ireland, and the Netherlands is similar to the Eurozone level, but wealth is about 20% higher in Italy and Belgium, and about 50% higher in France and Luxembourg. Countries lower down the ranking include Spain and Cyprus with about 60% of the Eurozone average, Greece with half of the Eurozone average, and Estonia and Slovakia with less than 20% of the Eurozone level.
Wealth in the Future
Wealth is expected to rise by nearly 39% in the next five years, reaching USD 334 trillion by 2018. Credit Suisse expects that the pace of wealth generation in emerging markets will continue to be greater than that of developed markets. The share of wealth of emerging markets will likely reach 23% by 2018 at USD 76.9 trillion, an increase of 0.5% on average each year. The annual rate of increase is projected to be 9.1% for emerging markets against 6.1% for developed markets.
Among major economies, China will likely be the largest gainer in relative terms with wealth to grow at a rapid pace of 10.1% over the next five years to USD 35.9 trillion. China accounts for 9.2% of global wealth, and this will rise to 10.7%. The US will lose some share, but will still account for 29% of global wealth in 2018 with USD 98 trillion. Wealth in India will also grow very rapidly, at an annual pace of 9.3% to USD 5.6 trillion in 2018. On a per adult basis, China will increase its wealth by USD 12,100 to USD 34,400 and India by USD 1,900 to USD 6,600.
Estimates by Credit Suisse suggest that the number of global millionaires could exceed 47 million in 2018, a rise of nearly 16 million. While the number of millionaires in emerging economies is still far below the levels in the US (18.6 million) or Europe (15.0 million), it is expected to increase substantially in the next few years. China could see its number almost doubling by 2018, raising the total to 2.1 million. Pushed by Brazil (an extra 186,000) and Mexico (an extra 87,000), Credit Suisse also expects a substantial increase in the number of millionaires in Latin America, which will reach almost one million in five years’ time (see Table 2).
Top of the Wealth Pyramid
Credit Suisse estimates suggest that worldwide there are 98,700 UHNW individuals, those with net assets exceeding USD 50 million. Of these, 33,900 are worth at least USD 100 million and 3,100 have assets above USD 500 million. North America dominates the regional ranking, with 48,000 UHNW residents (49%), while Europe has 24,800 individuals (25%), and 21,790 (22%) reside in Asia-Pacific, including China and India.
Wealth of Nations: Top 10 Countries with the Highest Average Wealth per Adult in Mid-2013 (USD)
The richest nations, with wealth per adult over USD 100,000, are found in North America, Western Europe, and among the rich Asia-Pacific and Middle East countries. They are headed by Switzerland, which in 2011 became the first country in which average wealth exceeded USD 500,000. It dropped below this mark in 2012, but this year equity price rises resulted in a new peak value of USD 513,000 per adult (see table 4).
While the wealth pyramid provides a “snapshot” of wealth at a given point of time, individuals are constantly moving between the various strata. Credit Suisse looks at wealth mobility to supplement what is known about changes in individual wealth positions.
The percentage of billionaire “stayers” is broadly similar across countries, although there are some notable outliers and some interesting wealth mobility differences between countries:
- France, Italy and Japan might be expected to have a lower percentage of “stayers” because their billionaire ranks shrank considerably over the decade.
- Canada, Germany and the UK also have fairly low retention rates.
- The US has by far the highest fraction of stayers, with 78% of the 2000-01 billionaires surviving to 2005 and 65% remaining in 2010. This may reflect that US billionaires have higher mean wealth, so they have to fall further on average to exit the group. Also, they face little or no exchange rate risk; whereas in other countries, entry and exit from the billionaire list may be due simply to fluctuations in the USD exchange rate.
- Of the BRIC countries, a notable feature for China is the sharp increase in the number of billionaires after 2005, reflecting the rapidly lengthening upper tail of the Chinese wealth distribution, resulting in high upward structural mobility.
- Of the BRIC countries, billionaires have the highest chance of surviving in Russia. The number of Russian billionaires more than doubled from 2005 to 2010, so the high survival rate likely reflects low downward structural mobility in the upper wealth tail, as well as higher than average wealth among world billionaires and – quite possibly – state protection of billionaire interests leading to lower exchange mobility at the top end than seen in other countries.
Notes to Editors
- The Report defines net worth or wealth as the value of financial assets plus real assets (mainly real estate), minus household debt.
- The figures presented in the Report are based on the best available data on household assets and debts, updated and estimated where necessary.
- All current data relate to mid-2013; the figures for earlier years indicate year-end values.
- Full information on sources and methodology is provided in the Global Wealth Databook 2013.
- Projections to 2018 are made by the Credit Suisse Research Institute and are based on forecasts of the three components of wealth, financial assets, non-financial assets and debts.
(1) Biographies of the authors
Anthony Shorrocks is Director of Global Economic Perspectives Ltd. After receiving his PhD from the London School of Economics (LSE), he taught at the LSE until 1983, when he became Professor of Economics at Essex University, serving also as Head of Department and Director of Economic Research for the British Household Panel Study. In 2001 he was appointed Director of the World Institute for Development Economics Research of the United Nations University (UNU-WIDER) in Helsinki where he remained until 2009. He has published widely on income and wealth distribution, inequality, poverty and mobility and was elected a Fellow of the Econometric Society in 1996. Publications include “The age-wealth relationship: A cross section and cohort analysis” (Review of Economics and Statistics 1975), “The portfolio composition of asset holdings in the United Kingdom” (Economic Journal 1982), and, with Jim Davies and others, “Assessing the quantitative importance of inheritance in the distribution of wealth” (Oxford Economic Papers 1978), “The distribution of wealth” (Handbook of Income Distribution 2000), “The world distribution of household wealth” in Personal Wealth from a Global Perspective (Oxford University Press 2008), “The global pattern of household wealth” (Journal of International Development 2009) and “The Level and Distribution of Global Household Wealth” (Economic Journal 2011).
Jim Davies is a Professor in the Department of Economics at the University of Western Ontario in Canada, where he has been a faculty member since 1977 and served as chair of the department from 1992 to 2001. He received his PhD from the London School of Economics in 1979. Jim was the director of the Economic Policy Research Institute at UWO from 2001 to 2012. In 2010 he completed a five-year term as managing editor of the academic journal Canadian Public Policy. From 2006 to 2008, he directed an international research program on household wealth holdings at UNU-WIDER in Helsinki and edited the resulting volume, “Personal Wealth from a Global Perspective” (Oxford University Press 2008). He has authored two books and over 70 articles and chapters in books on topics ranging from tax policy to household saving and the distribution of wealth. Publications include “The Relative Impact of Inheritance and Other Factors on Economic Inequality” (Quarterly Journal of Economics 1982), “Wealth and Economic Inequality” (Oxford Handbook of Economic Inequality, Oxford University Press, 2009), and several publications on wealth authored jointly with Anthony Shorrocks and others. Jim is also the editor of “The Economics of the Distribution of Wealth”, a two volume compendium of classic articles that will be published later this year by Edward Elgar.
Rodrigo Lluberas is a PhD candidate in Economics at Royal Holloway College, University of London and a visiting scholar at the Institute for Fiscal Studies. He holds an MSc in Economics from University College London and a BA in Economics from Universidad de la Republica, Uruguay. Prior to undertaking his MSc, he worked for three years as an economic analyst at Watson Wyatt Global Research Services and more recently as a research assistant at NESTA. His main areas of expertise are pensions, consumption and wealth.
(2) Scope and methodology
The 2013 Credit Suisse Global Wealth Report (the Report) and the more detailed accompanying Global Wealth Databook aim to provide the most comprehensive study of world wealth. Unlike other studies, they measure and analyze trends in wealth across nations, from the very bottom of the “wealth pyramid” to ultra high net worth individuals.
This fourth Wealth Report continues our close collaboration with Professors Anthony Shorrocks and Jim Davies, recognized authorities on this topic, and the principal authors of “Personal Wealth from a Global Perspective,” Oxford University Press, 2008.
This year, our special focus is on wealth mobility, which appears surprisingly high in the short run. For instance, less than two-thirds of the 2000–01 Forbes billionaires remained in the list by 2005, and barely half by the end of the decade. Across generations, the latest evidence points to more persistence, although continued high wealth growth in countries like China will ensure that many individuals rise rapidly in the wealth pyramid.
Taking a broader perspective, our analysis suggests that ten generations or more have to lapse before the wealth of an individual in North America is completely independent of the wealth of their ancestors. From a global point of view, individuals in China and India have a relatively high probability to be upwardly mobile as a result of the high economic growth in these countries.
The Credit Suisse Global Wealth Report lays the foundation for a long-running examination by the Credit Suisse Research Institute of one of the crucial research areas in economics, and a vital driver of future megatrends. Moreover, it continues the thought leadership and proprietary research undertaken by the Research Institute over the past three years.
Of note, China and India are treated as separate regions in the report due to the size of their populations.
(3) The Credit Suisse Research Institute
The Credit Suisse Research Institute identifies and provides insights on global themes and trends. The objective of the Research Institute is to provide our clients with leading edge advice by leveraging internal and external expertise, thus reinforcing our integrated global bank approach.
The Institute was established in December 2008 to conduct research on new emerging or influential topics, working with some of the world’s most distinguished experts, academics and institutions and Credit Suisse’s global network of internal analysts, and makes this available throughout the Bank for the business units to create innovative products, solutions and services for Credit Suisse’s clients.
Clients increasingly require global reach, local expertise and competitive products and services from the financial services industry. The Institute’s investigations are conducted with the goal to furnish clients across divisions and regions with an in-depth analysis of fundamental social, economic, scientific, environmental and demographic trends that are expected to impact global markets in the future.
The Research Institute is chaired by the Chairman of the Board of Credit Suisse, Urs Rohner, and managed by an Operating Committee from Credit Suisse’s research units from across the Bank. The Institute draws on eminent Senior Advisors as well as selected Credit Suisse researchers to provide advice, insight and guidance on global themes and trends for the Institute’s research agenda. The Institute’s Senior Advisors are characterized by their interdisciplinary backgrounds and networks across sciences, academia, business and the political arenas. They include Walter B. Kielholz, The Rt. Hon. Sir John Major, KH, CH, Liu Mingkang, Dr. Laura D. Tyson, and Dr. Ernesto Zedillo. For more information, visit: https://www.credit-suisse.com/researchinstitute.