Signs of global wealth recovery after coronavirus-inspired nosedive, report says

The fortune of the rich Asians has recovered sharply since its lowest point during the pandemic in March 2020 to slightly above the levels Pre-Covid 19, the latest Credit Suisse annual wealth report reveals.

According to the report, ultra-high net worth individuals (UHNW) in Asian nations, particularly, South Korea, China and Japan saw their wealth recover and surpass the levels they had in February. The coronavirus crisis had wiped out as much as a third or more of their wealth in March.

Global wealth manager, Credit Suisse, said that South Korean businessmen have seen a 9.2 per cent increase in their wealth from the previous high in February 2020, while Chinese businessmen have seen their wealth rise by 3.2 per cent and Japanese businessmen have seen their wealth rise by 1.4 per cent from the levels they had in February 2020.

While the news may have been good for these countries, other high net worth individuals were negatively impacted by the pandemic. In Asia, UHNWs suffered a 9-15 per cent loss in wealth while in Europe some individuals lost as much as 30 per cent since February.

Thailand’s 10 billionaires saw their wealth wiped out by as much as 30 per cent at the peak of the crisis in March this year but that steep fall has seen recovery and as of June this year their wealth erosion has been around 14.3 per cent, better than the 1,000 Forbes billionaires who have seen their wealth decline by as much as 15.2 per cent. (See Table 2).

Household Wealth Up

The Coronavirus or Covid-19 pandemic that has killed 1.15 million people globally and infected close to 43 million people has had little impact on the overall wealth of the people across the world as central banks have come to the rescue with eased monetary policies that have kept the economies from falling apart.

“2019 was a year of tremendous wealth creation – total global wealth rose by USD 36.3 trillion during the year – our experts estimate total household wealth dropped by USD 17.5 trillion between January and March. From March onward, stock markets have rebounded and house prices have soared, and the data available for Q2 2020 suggests that household wealth is roughly back to the level at the end of last year,” Urs Rohner, chairman of the Board of Directors of Credit Suisse Group AG, said in the preface to the report.

The report said that total global wealth rose by USD 36.3 trillion and wealth per adult reached USD 77,309, up 8.5 per cent versus 2018. As a consequence, the world has been better placed to absorb any losses from COVID-19 during 2020. However, while events this year caused widespread wealth losses during January–March, these were reversed by June in most countries. Surprisingly, global household wealth is slightly above the levels they were at the start of the year.

Poor Hit the Hardest

The pandemic has taken a massive toll on the have-nots as there has been a surge in the unemployment numbers amid the continued shutdown of the small and medium-sized enterprises (SME), while at the same time larger companies continue to scale back their operations.

The report said that as the lower-wage workers have been among the worst impacted, it is likely that income inequality is widening in many countries around the world, despite the efforts by the governments to support those in need.

But the low-interest-rate environment is likely to continue for some time and that has provided an impetus to the business sector and consumer to continue to spend their way out of the crisis.

The Credit Suisse Wealth Report said that among 35 countries with financial balance sheet data, 27 experienced a decline in household net financial wealth, and four (Denmark, Australia, the United States and Canada) recorded losses above 9%. For the world as a whole, it estimates that total household wealth dropped by USD 17.5 trillion between January and March, a 4.4% decrease compared to the value at the end of 2019.

Roughly two-thirds of this is due to currency depreciation against the US dollar. If exchange rates had remained fixed, the decline would have been just 1.2%.

From March onward, a remarkable reversal of fortune occurred. Stock markets rebounded and housing prices edged upwards.

The report said that household wealth has grown at a significant pace this century. Using current USD exchange rates, total household wealth rose from USD 117.9 trillion in 2000 to 399.2 trillion at end-2019, averaging 6.6% growth per annum. But growth has not been even over time. Again measured in current US dollars, there have been two distinct phases separated by the global financial crisis: a “golden era” between 2000 and 2007 when total wealth grew by 10.3% per annum, followed by a sharp 7.5% decline in 2008, after which growth resumed at a modest pace averaging 5.7% per annum from 2008 onward.

“From this perspective, the (2008) financial crisis appears to have permanently damaged the growth prospects for household wealth. Similar conclusions apply when allowance is made for population growth: wealth per adult in US dollars grew by 4.9% per annum during 2000–19, split between 8.2% pre-2008 and 4.1% post-2008. This is not a good omen for wealth growth after the COVID-19 crisis.”

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