Allianz has unveiled the twelfth edition of its Global Wealth Report, which takes a close look at the household asset and debt situation in nearly 60 countries to reveal significant growth in financial assets over the past year.
2020 was the year of extreme contrasts. Covid-19 has destroyed millions of lives and livelihoods and the global economy has plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unsuspected sums to support the economy, markets and people.
Incomes stabilized and stock markets recovered quickly.
With this tailwind, household wealth resisted the Covid-19 crisis: global gross financial assets increased by 9.7% in 2020, reaching for the first time the magic bar of 200,000 billion euros.
Most households have not really saved but simply put their money aside. All that unused money in bank accounts is a wasted opportunity. ”
Savings were the main driver: as closures dramatically reduced consumption opportunities, the global phenomenon of “forced savings” was born.
New savings jumped 78% to 5.2 trillion euros in 2020, an all-time high. Inflows into bank deposits – the default option of forced savings, simply leaving unspent income in the bank account – nearly tripled (+ 187%).
Bank deposits accounted for half or more of new savings in all markets considered. As a result, for the first time, bank deposits around the world grew at a double-digit rate of 11.9%; the previous growth peak was 8% during the 2008 financial crisis. While securities in the asset class – supported by the strength of the stock markets – grew by 10.9%, insurance and fund assets pensions experienced a much weaker development, increasing by 6.3%.
Despite a mixed start, despite persistent bottlenecks in global trade and despite new viral variants imposing further restrictions, global GDP will grow sharply in 2021, fueled by the vaccination campaign that allows economies to reopen. and (partially) to return to normal.
In addition, accommodative monetary policies and generous fiscal support remain in place. The result for savers around the world? Excluding major market corrections, 2021 should prove to be another good year for them, with overall financial asset growth of around 7%.
“The head numbers are very impressive,” said Ludovic Subran, chief economist of Allianz. “But we should dig a little deeper. Most households haven’t really saved but just put their money aside. All that unused money in bank accounts is a wasted opportunity.
Instead, households should invest in their retirement and green transition, enabling societies to harness the overarching challenges we face, climate and demographic change. My fear is that if households end up dishonoring, money ends up taking revenge on consumption and only fuels inflation. We urgently need a new “culture of savings”.
In 2020, financial assets in emerging markets (+ 13.9%) again grew faster than those in advanced markets (+ 10.4%), returning to normal growth patterns after three years. As a result, the prosperity gap between rich and poor countries has also narrowed somewhat.
The trend reversal that we diagnosed last year – the further estrangement of the poorest and richest countries – therefore seems to have stopped for the moment.
However, it is (much) too early to sound the green light. While many developing countries have performed surprisingly well in the first year of the pandemic, it appears that the long-term consequences and challenges – from insufficient immunization and reconfigured supply chains to digital and green transformation – could mainly affect the poorest countries.
The same can be said with regard to the distribution of national wealth. While the national middle class has shrunk in recent years as its share of total national wealth has shrunk in many countries, for 2020 at least, huge social transfers appear to have succeeded in thwarting a further distancing from wealth classes.
But this happy affair may not last when state support expires and the direct effects of the crisis – the loss of millions of jobs – make themselves felt again. In addition, the crisis has led to a significant degradation of school education. The Covid-19 is thus likely to further entrench social immobility. The gradual disappearance of the middle class has only temporarily stopped.
“The pandemic is a much bigger challenge for the poorest countries,” commented Michaela Grimm, co-author of the report. “Most likely, Covid-19 will continue to hold back the economic development of this group of countries much longer than in advanced markets. But the real challenge comes after:
These countries will find themselves in a post-pandemic world that will make it increasingly difficult for them to assert their comparative advantages in a proven way, given the lasting changes in technology, politics and lifestyles. The gradual closing of the global prosperity gap – the defining development over the past decades – can no longer be taken for granted. “
Despite the Covid-19 crisis, the gross financial assets of Asian households grew by 12.7% in 2020, even faster than the already strong previous year (9.8%).
All asset classes contributed to the rally with double-digit growth rates: bank deposits grew 12.3%, securities 13.9% and insurance and pensions 11.4%. Most countries in the region grew faster in 2020 than in 2019, with Cambodia leading the way with an increase of over 20%, followed by Sri Lanka (17.9%), South Korea (13.9%) and China (13.6%).
Unlike assets, growth in liabilities slowed further, increasing by 10.9% in 2020, the smallest increase since 2008, the year of the Great Financial Crisis (GFC). In a context of sluggish economic growth, the debt ratio (commitments as% of GDP) continued to climb, however, and reached 61% at the end of 2020, almost double the level observed immediately after the GFC; it is now comparable to the level observed in certain European countries such as Italy or Germany.
Finally, net financial assets increased by 13.5%. With net financial assets per capita of 7,280 euros, the regional average is much higher than that of other emerging regions such as Latin America (5,390 euros) or Eastern Europe (5,960 euros) – but still well below the world average of 27,630 euros.
The differences in the region, however, are very pronounced. Indeed, Singapore and Taiwan are now among the top 10 richest countries (financial assets per capita, see table), as they have climbed many levels in recent years.
This contrasts sharply with some European countries like Italy, France or Great Britain which have fallen quite dramatically. As a result, the top 10 today is different from that of 2000: it is more of a Scandinavian-Asian affair – but with the United States and Switzerland still reigning supreme.
Top 20 in 2020 by net financial assets per capita (gross)
1 United States
8 New Zealand
12 Great Britain
20 South Korea