Credit Suisse Global Wealth Report 2022: Fast wealth growth in times of uncertainty
Despite the uncertain times, aggregate global wealth grew by 12.7% in 2021, which is the fastest annual rate ever recorded. On the other hand, inflation has influenced wealth levels this century and will continue to do so in the upcoming years.
A record 2021 for household wealth
By the end of 2021, global wealth totaled an estimated USD 463.6 trillion, which represents an increase of 9.8% versus 2020 and is far above the average annual +6.6% recorded since the beginning of the century. Setting aside exchange rate movements, aggregate global wealth grew by 12.7%, making it the fastest annual rate ever recorded.
Global median wealth increases
In 2021, we were able to observe the rise in wealth inequality. One likely cause of this was the strong rise in financial assets during the COVID-19 pandemic. However, over the longer term, global wealth inequality has fallen this century due to the faster growth achieved in emerging markets. Consequently, global median wealth has risen approximately twice as fast as global wealth per adult.
The wealth pyramid 2021
The wealth pyramid summarizes the distribution of wealth among adults worldwide.
Trends in global wealth distribution we have seen since the beginning of the century:
- A large base of low-wealth holders underpins higher tiers occupied by progressively fewer adults. We estimate that 2.8 billion individuals – 53% of all adults in the world – had wealth below USD 10,000 in 2021.
- The next segment, covering those with wealth in the range of USD 10,000–100,000, has seen the biggest rise in numbers this century, after more than trebling in size from 504 million in 2000 to 1.8 billion in mid-2021. This reflects the growing prosperity of emerging economies, especially China, and the expansion of the middle class in the developing world.
- The upper-middle segment, with wealth ranging from USD 100,000 to USD 1 million, has also trebled in size this century, growing from 208 million to 627 million.
- The top tier of high net worth (HNW) individuals (i.e. USD millionaires) remains relatively small in size. However, the group has expanded rapidly in recent years and now numbers 62.5 million, or 1.2% of all adults. Global millionaires exceeded 1% of adults for the first time in 2020, which means that the group has grown rapidly in recent times.
Influence of inflation on household wealth
It has to be kept in mind that inflation lowers the wealth growth rates. We estimate that real wealth increased by +8.2% in 2021. As we look ahead to a period of greater inflation than in the past two decades, the comparison of real and nominal wealth trends grows in relevance.
Inflation is one of the reasons why the number of US dollar millionaires has risen quickly this century. Higher inflation makes it easier to pass the one million US dollar threshold. It is worth pointing out that although the number of millionaires in lower-income countries is still far below the levels in the United States or Europe, the numbers are expected to accelerate over the next five years.
The low-interest regime that supported asset price inflation now seems responsible, in part, for commodity inflation, which will likely cause further hardship for wealth holders and non-wealth holders alike. As a result, wealth growth may be handicapped by inflation and the impact of higher interest rates on investment and asset price levels.
The COVID-19 pandemic and more recently the war between Russia and Ukraine have contributed toward a rise in global inflation that is expected to persist according to International Monetary Fund (IMF) forecasts.
The future of wealth
Wide-spread higher inflation and the prospect of rising interest rates are likely to have a negative impact on asset prices in the near future, as was already evident during the first half of 2022. The resulting decline in household wealth will be significantly greater than the nominal drop due to the inflation. Since inflation will at the same time reduce real public debt, a redressing of the altered balance of public versus private wealth seen during the pandemic may occur.
Nevertheless, we expect global wealth in nominal US dollars to increase by USD 169 trillion by 2026, equating to a rise of 36%. Middle-income countries will be the primary driver of global wealth increases. Our forecast is that, by 2024, global wealth per adult should pass the USD 100,000 threshold and that the number of millionaires will exceed 87 million individuals over the next five years.
While it is too early to assess the impact of widespread inflation and the Ukraine war, wealth growth proved resilient in 2020 when COVID-19 caused major economic disruption, and the recovery during 2021 produced even more favorable conditions, allowing aggregate global wealth to grow at the fastest annual rate ever recorded. However, higher inflation is likely to lower real global wealth in 2022 and beyond. But higher inflation also yields higher forecast values for global wealth when expressed in current USD.