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Global wealth reached a new all-time high in 2013 and is expected to continue rising in the coming years. Emerging markets are now an increasingly important segment of the global economy and are expected to account for a greater share of world wealth. In addition, several high-income economies in the Eurozone are just exiting from recession, while growth momentum elsewhere in the developed world is relatively healthy.
Global Wealth Growth to Accelerate Slightly
Since 2000, global wealth at prevailing USD exchange rates has increased at an annual rate of 6.2 percent, lagging the rate of nominal GDP growth, which was 6.6 percent according to IMF estimates. This is due in part to the decline in financial and real asset prices during the global financial crisis. Over the next five years we believe that the rate of annual wealth growth will accelerate by 0.4 percent to 6.6 percent. This will generate an additional 93 trillion US dollars in global wealth over the five-year forecast horizon, equivalent to an extra 14,900 US dollars per adult.
US To Remain Undisputed Leader
The US will remain the undisputed leader in terms of aggregate wealth, with total net worth approaching 100 trillion US dollars by 2018. At today's prices, this corresponds to approximately 88 trillion US dollars, 23 percent higher than the 2013 level. Japan will likely remain the second wealthiest economy in the world until China overtakes it, probably at some point in 2016. By 2018, Chinese wealth is expected to approximate the level of US wealth in 1993. The Eurozone, currently accounting for 24 percent of global wealth, will likely see its share decline a little to 23 percent. In absolute terms, however, its wealth will rise by more than 29 percent over the five-year period, putting the Eurozone where the US was in 2011.
Winners Among Emerging Markets
Among emerging markets, it is worth highlighting the cases of Brazil and Indonesia. Since 2000, Brazil has seen its wealth triple – equivalent to an annual growth rate of 10.4 percent – while net worth in Indonesia has increased more than six-fold. If these rapid rates of growth continue, aggregate wealth in Indonesia will rise to where the US was in the early 20th century, while Brazil will improve by the equivalent of 18 US years. India will also see a significant increase in its wealth, which from a historical point of view, is expected to take it from where the US was in 1912 to the US level 15 years later (in 1927). However, the recent deceleration in growth in these economies, as well as the weakness in their currencies, means that there are significant downside risks to this forecast.
Top of the League Table
In terms of wealth per adult, Switzerland, Australia and Norway will likely remain at the top of the league table, while the US will still be among the top five nations. Large emerging economies, such as Brazil, China, Russia and South Africa, may see a substantial improvement in their wealth ranking as a result of relatively high GDP growth. Among large developing economies, wealth per adult in Turkmenistan and Chile will likely approach the levels of some developed economies, such as Slovenia and Malta.
Emerging Markets to Increase Their Share of Global Wealth
Between 2000 and 2013, emerging markets nearly doubled their share of global wealth from 12 percent to 21 percent, thus increasing their share of global wealth by 0.7 percent each year. We expect that the pace of wealth generation in emerging markets will continue to be greater than that of developed markets, although this difference will be less striking in the next five years. The share of wealth of emerging markets will likely reach 23 percent by 2018, an increase of 0.5 percent on average each year. The annual rate of increase is projected to be 9.1 percent for emerging markets against 6.1 percent for developed markets.
Among major economies, China will likely be the largest gainer in relative terms. Since 2000, Chinese wealth has increased by 13.3 percent per annum, and we expect it to continue to grow at a rapid pace of 10.1 percent over the next five years. China accounts for 9.2 percent of global wealth, and this will rise to 10.7 percent, while the US will lose some share, but will still account for 29 percent of global wealth in 2018. Wealth in India will also grow very rapidly, at an annual pace of 9.3 percent, although a fraction down on the 9.5 percent growth rate since 2000. On a per adult basis, China will increase its wealth by 12,100 US dollars to 34,400 and India by 1,900 US dollars to 6,600.
Financial Assets Will Drive Wealth Gains
Advances in wealth will result from gains in both real and financial assets. Financial assets accounted for more than half of gross wealth during the past decade, but the collapse in asset prices during the financial crisis caused the share of wealth to fall in 2008. Since then, financial assets have staged a remarkable recovery and are up 32 percent (6.4 percent per annum) against an increase of 23 percent (4.8 percent per annum) for real assets. We believe that financial assets will continue to do well, and will rise by 7.5 percent per annum, against an increase of 5 percent per annum for real assets.
We expect the middle segment of the wealth pyramid – individuals with wealth holdings between 10,000 and 100,000 US dollars – to represent 27.4 percent or 1.4 billion adults by 2018. Of the additional 307 million adults in the middle segment by 2018, 89 percent will come from Asia-Pacific (including China and India) and an astonishing 58 percent from China alone.
Who Wants to be a Millionaire?
The catching-up process by the emerging economies is also evident in the increasing proportion of members in the top segment of global wealth distribution. Our estimates suggest that the number of global millionaires could exceed 47 million in 2018, a rise of almost 16 million. While the number of millionaires in emerging economies is still far below the level in the US (18.6 million) or Europe (15.0 million), it is expected to increase substantially in the next few years. Asia-Pacific is expected to increase its number of millionaires by 3.8 million, reaching 9 million by 2018. 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), we also expect a substantial increase in the number of millionaires in Latin America, which will reach almost 1 million in five years' time.