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GLOBAL WEALTH REPORT 2019 – CREDIT SUISSE

Written by Talent KAS

Related Topics: Reports & Indices, Wealth Distribution

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Credit Suisse Group, a Switzerland-based multinational investment bank, has released the 10th edition of its annual Global Wealth Report.

Global Wealth Report 2019

The report tracks the growth and distribution of wealth – in terms of the numbers of millionaires and billionaires and the proportion of wealth that they hold – as well as the status of inequality around the world.

Definition of Wealth

  • Wealth is defined in terms of “net worth” of an individual.
  • This, in turn, is calculated by adding up the value of financial assets (such as money) and real assets (such as houses) and then subtracting any debts an individual may have.

Drivers of the Wealth of Nations

Overall size of the population

  • For a country with a huge population, in terms of final calculation, this factor reduces the wealth per adult.
  • However, a big population also provides a huge domestic market and this creates more opportunities for economic growth and wealth creation.

Country’s saving behavior

  • A higher savings rate translates into higher wealth.
  • The two variables share a strong positive relationship.
  • Overall, a percentage point rise in the savings rate raises the growth rate of wealth per adult by 0.13% each year on average.
  • For example, household wealth in Poland (with an 18% savings rate) would be expected to be 27% higher in mid-2019 if it had matched the savings rate of Sweden (28%).

General level of economic activity

  • The most important factor in determining the different trends in household wealth among countries is the general level of economic activity as represented by aggregate income, aggregate consumption or GDP.
  • The expansion of economic activity increases savings and investment by households and businesses, and thus raises the value of household-owned assets, both financial and non-financial.
  • But wealth and GDP do not always move in tandem. This is especially so when asset prices fluctuate markedly as they did during the financial crisis.

Key Findings of the Report

  • The average wealth per adult globally stood at $70,849.
  • North America and Europe have the highest wealth per adult at $417,694 and $153,973, respectively.
  • China has overtaken the United States to become “the country with most people in the top 10% of global wealth distribution”.
  • The report singles out India, along with China and Vietnam as the best examples of how wealth can be increased by pushing for higher economic growth.
  • Just 47 million people – accounting for merely 0.9% of the world’s adult population – owned $158.3 trillion, which is almost 44% of the world’s total wealth.
  • 2.88 billion people – accounting for almost 57% of the world’s adult population –owned just $6.3 trillion or 1.8% of the world’s wealth.
  • The bottom half of wealth holders collectively accounted for less than 1% of total global wealth in mid-2019, while the richest 10% own 82% of global wealth and the top 1% alone own 45%.
  • The global financial crisis of 2008-09 seems to decidedly hurt those at the bottom of the pyramid more than the wealthiest as inequalities within countries grew in the wake of the financial crisis.

Indian Scenario

  • Total wealth in India increased fourfold between 2000 and 2019, reaching $12.6 trillion in 2019, making India the fifth globally in terms of the number of ultra-high net-worth individuals.
  • Wealth per adult for India at $14,569 is nearly 80% below the global average.
  • 78% of India’s adult population has wealth below $10,000, while 1.8% of India’s population has more than $100,000.
  • At the other extreme, 1,790 adults have wealth over $100 million.
  • India accounts for 2% of the world’s millionaires.
  • Personal wealth in India is dominated by property and other real assets, which make up the bulk of household assets.
  • The returns from real estate have come down in the past few years, and this is a major factor that has contributed to the slowdown in the growth of household wealth.
  • India is expected to grow its wealth very rapidly and add $4.4 trillion in just five years, reflecting an increase of 43%.

Inequality in India

  • While the number of wealthy people in India has been on the rise, a larger section of the population has still not been part of the growth in overall wealth.
  • There is still considerable wealth poverty, reflected in the fact that 78% of the adult population has wealth below $10,000.
[Source: Indian Express, The Hindu, Livemint]

 

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