Financial markets experienced a robust rally last year following a dip in 2022, boosting global net wealth by more than 4%. The Boston Consulting Group's (BCG) annual global wealth report highlights significant growth, with the value of assets worldwide increasing to $477 trillion (€441 trillion) in 2023. This represents a 4.3% jump, primarily driven by a nearly 7% rise in financial wealth, which excludes real assets like property and land, as well as liabilities.
This growth marks a positive shift after a challenging post-COVID period characterized by high interest rates and currency depreciation. In 2022, total wealth saw a minimal rise of 0.2%, with financial wealth experiencing a 4% decline. Despite the improvement in 2023, BCG notes that full recovery remains elusive. The 4.3% increase is modest compared to the 7.1% average annual growth rate from 2014 to 2021.
Regional Wealth Dynamics
From 2022 to 2023, the highest annual growth rates in net wealth were recorded in Latin America (7.9%) and the Middle East and Africa (7.8%). Projections for 2023 to 2028 suggest that the Middle East and Africa will lead with a 10% annual growth rate, followed by Latin America. However, these regions are not the wealthiest; North America and the Asia-Pacific area hold that distinction, with Western Europe following.
"Financial wealth in the developed economies of North America and Western Europe took a particularly hard hit in 2022, but both regions bounced back in 2023," BCG reported. North America was among the fastest-growing regions, accounting for over 50% of all new financial wealth in 2023, driven by a substantial stock market recovery. The tech and semiconductor sectors notably bolstered financial gains, with companies like Apple, Nvidia, and Microsoft reaching market capitalizations in the $3 trillion (€2.77 trillion) range.
Western Europe's financial wealth growth was more subdued due to smaller stock market gains and less investment in shares. The Asia-Pacific region also saw moderate growth, rising 5.1% in 2023, largely due to a slowdown in wealth creation in China. Nevertheless, robust growth is anticipated in this region through 2028.
Uneven Wealth Distribution
Wealth increases were not evenly distributed within regions. The UBS Global Wealth Report, released concurrently with BCG's report, provides insights into individual countries' wealth changes. From 2022 to 2023, Cyprus experienced the strongest contraction, with a slump exceeding 30%. Mexico and Kazakhstan followed, with contractions of nearly 20% and over 17%, respectively.
In Western Europe, Switzerland and Italy faced significant declines in wealth per adult, nearly 6% and 4%, respectively. Conversely, Turkey saw an impressive rise of over 157% in wealth per adult between 2022 and 2023. The UK and Denmark also reported increases of nearly 10% and 6%, respectively.
UBS also highlighted the distribution of millionaires worldwide, predicting an increase in their numbers over the coming years. Most millionaires are currently in the US, followed by mainland China and the United Kingdom.
Looking Forward
The rebound in global financial markets and the resulting increase in wealth are encouraging signs for the global economy. However, the disparity in wealth distribution and the slower recovery in some regions underscore ongoing economic challenges. Policymakers and investors will need to navigate these complexities to sustain and evenly distribute wealth growth in the coming years.
These insights from the BCG and UBS reports highlight the dynamic and evolving nature of global wealth, offering a detailed look at the factors driving economic changes across different regions. As we move forward, monitoring these trends will be crucial for understanding the broader economic landscape and making informed financial decisions.
Source: Euronews
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