Global wealth dropped by $11.3 trillion last year, marking the first decline since the Global Financial Crisis. However, the outlook for the next few years is more positive.

Global wealth dropped by $11.3 trillion last year, marking the first decline since the Global Financial Crisis. However, the outlook for the next few years is more positive.

Global Wealth Takes a Hit in 2022, but a Brighter Future Lies Ahead

The Global Wealth Report 2023, jointly published by UBS and Credit Suisse, unveiled a sobering reality: total private wealth worldwide contracted by 2.4% or $11.3 trillion in 2022, amounting to $454.4 trillion. Moreover, wealth per adult diminished by 3.6% or $3,198, settling at $84,718. While the report found that total wealth increased by 3.4% when exchange rates were held constant, this growth rate represents the slowest since 2008.

The previous year was marked by the global economy’s struggle to recover from the repercussions of the COVID-19 pandemic. High inflation forced central banks to raise interest rates, raising the cost of borrowing for both consumers and businesses. Simultaneously, the growth rates faced headwinds due to the war in Ukraine.

Unsurprisingly, developed regions bore the brunt of these challenges, witnessing losses in wealth. Stock and bond prices suffered declines throughout the year, causing North America and Europe to collectively lose $10.9 trillion. The Asia-Pacific region was not spared either, experiencing a loss of $2.1 trillion.

Conversely, Africa and India successfully bucked the trend, managing to grow their wealth by 1.5% ($85 billion) and 4.6% ($675 billion) respectively in 2022. Among the bright spots of global wealth, Latin America stood out as an “outlier.” The region’s total wealth increased by an astounding 18.6% ($2.4 trillion) thanks to the United States’ near-shoring of manufacturing and a 6% currency appreciation compared to the dollar.

Looking at individual countries, the United States suffered the largest nominal decrease in wealth, losing $5.9 trillion. However, this decrease only represented a 4.1% decline from the previous year. On the other hand, Egypt experienced the worst year in percentage terms, with average household wealth plummeting by 22.7% due to soaring inflation and a 37% depreciation in the value of the Egyptian pound.

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In 2022, Brazil emerged as the biggest winner. The country’s average household wealth skyrocketed by 31.6% ($1.1 trillion), benefiting from relatively strong 2.9% GDP growth and the appreciation of the Brazilian real against the dollar. Russia and Mexico also experienced notable wealth increases of 16.1% and 15.4% respectively. Mexico’s currency appreciated against the dollar, while its GDP grew by 3.1%. Meanwhile, Russia’s housing prices surged due to lower interest rates, and the Russian ruble strengthened by 5.6% over the year.

Despite the global wealth downturn in 2022, UBS and Credit Suisse are optimistic about the future. They predict a turnaround in the coming years, projecting that global wealth will increase by 38% to reach $627 trillion by 2027. This positive outlook is fueled by the continued development of middle-income countries, painting a brighter future for global wealth.

In conclusion, the Global Wealth Report 2023 highlights the challenges faced by the global economy in 2022, with wealth contracting and countries experiencing varied outcomes. While developed regions suffered losses, Africa, India, and Latin America managed to achieve remarkable growth. Looking ahead, optimistic forecasts indicate that global wealth will rebound, led by the development of middle-income countries.