Global wealth is growing at a faster rate in emerging nations. Why?
Emerging countries continue to accumulate wealth at a faster rate than developed nations, according to a new report than confirms a seismic shift is taking place in the world’s economic landscape.
Total global wealth grew 14 percent to $231 trillion in June 2011, up from $203 trillion at the beginning of 2010, according to the second annual Global Wealth Report issued this month by Credit Suisse. Emerging markets in Latin America, Africa and Asia saw the fastest growth, while the United States remained the largest wealth generator.
“These are times of unprecedented economic change, and a radical reconfiguration of the world’s economic order is taking shape,” said Osama Abbasi, chief executive officer of the Asia Pacific for Credit Suisse. “Emerging markets are important drivers of the global recovery and remain the key growth engines of global wealth.”
Global wealth is expected to rise by 50 percent to $345 trillion in the next five years, said Credit Suisse, but developing nations will surge ahead of mature economies. “Over the next five years, the wealth of emerging economies is expected to leapfrog the developed word, due to their more promising growth prospects,” said the Credit Suisse report.
Wealth in China and Africa is expected to rise by more than 90 percent to $39 trillion and $5.8 trillion, respectively, by 2016. Wealth in India and Brazil is forecast to more than double to $8.9 trillion and $9.2 trillion, respectively. China is forecast to surpass Japan to become the second wealthiest country.
Wealth per adult is expected to rise 40 percent to $70,700. Individuals in emerging markets have the greatest potential to increase personal wealth because they have less debt and fewer financial assets relative to their incomes than do residents of developed countries. Europeans are “sitting on” much higher average debt per adult - $25,550 vs. $9,227 for individuals in the Asia Pacific.
“Credit Suisse believes this fast emerging wealth will drive new trends in consumption and investment in Asia,” said Giles Keating, global head of research for private banking and asset management at Credit Suisse.” Higher wealth growth in Asia coupled with higher debt per adult in Europe may provide grounds for a collaboration to resolve the European debt crisis, Keating said.
Wealth per adult increased 9 percent from $46,600 in January 2010 to $51,000 in June 2011. In the Asia Pacific total household wealth increased 23 percent from $61 trillion in January 2010 to $75 trillion in June 2011. In contrast, total wealth grew 9.2 percent and 4.8 percent, in North America and Europe, respectively, over the same period. The uneven growth reflects a “global megatrend” of the continued shift of economic power from the developed world to emerging economies.
The top of the wealth pyramid is occupied by 29.7 million adults with household wealth of more than $1 million. The group makes up less than 1 percent of the population, but owns 38.5 percent of global household wealth. Europeans surpassed North Americans for the share of the world’s millionaires. The continent accounts for 37.2 percent of millionaires, while North American has 37 percent. Japan has 11 percent, or 3.1 million millionaires. Australia and China have 1 million each.
High Net Worth individuals - - those with net assets exceeding $50 million – are now an estimated 84,700 globally. Of these, 29,000 have assets worth at least $100 million each, and 2,700 have assets above $500 million. The USA leads this group with 42 percent – or 35,400 of the world’s high net worth individuals. China has 6.4 percent, Germany, 4.9 percent, Switzerland, 4.5 percent and Japan 4 percent.
The most recent wealth studies by Millionaire Corner shows that the number of affluent households in the U.S. is beginning to rebound from lows reached in the recession, but growth in wealth remains constrained by the real estate market and overall economy. The number of affluent households – those with a net worth of $500,000 not including primary residence – rose from 12.7 million in 2009 to 13.5 million in 2010. Households with a net worth of $1 million to $5 million not including primary residence rose from 7.8 million in 2009 to 8.4 million in 2010. The number of high net worth Americans – defined as having a net worth of $5 million or more not including primary residence - rose from 980,000 in 2009 to close to 1.1 million in 2010.
Switzerland, Australia and Norway are the tree richest nations in the world when measured in terms of average wealth per adult in 2011.