Global Wealth Drops For First Time Since 2008 Financial Crisis

Most of losses heavily concentrated in wealthier and more developed regions, such as North America and Europe, which lost a combined $10.9 trillion in 2022.

A currency stretches near the screens showing the Korea Composite Stock Price Index (KOSPI), (C), and the foreign exchange rate between U.S. dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea, on May 22, 2023. Lee Jin-man/AP Photo

Total global wealth dropped in 2022 for the first time since the financial crisis of 2008, according to an annual report.

The Global Wealth Report 2023, published on Aug. 15 by both Credit Suisse and UBS, reported that total private wealth declined by 2.4 percent, or $11.3 trillion, to $454.4 trillion.

Wealth per adult fell 3.6 percent, or $3,198, to $84,718 by the end of last year, as worldwide wealth plunged following a boom in 2021.

Most of the losses were heavily concentrated in wealthier and more developed regions, such as North America and Europe, which lost a combined $10.9 trillion in 2022.

Financial assets saw the face the brunt of the decline last year, while non-financial assets, particularly real estate, remained resilient, despite rapidly rising interest and mortgage rates.

The report blamed the bulk of the financial losses on the appreciation of the U.S. dollar against other major currencies.

“Much of the decline in wealth in 2022 was driven by high inflation and the appreciation of the U.S. dollar against many other currencies,” said economist Anthony Shorrocks, an author of the report.

“Financial assets contributed most to wealth declines while non-financial assets—mostly real estate—stayed resilient, despite rapidly rising interest rates,” he said.

“But the relative contributions of financial and non-financial assets may reverse in 2023 if house prices decline in response to higher interest rates,” Mr. Shorrocks continued.

The United States faced the greatest loss, followed by Japan, China, Canada, and Australia.

Residents in the Asia-Pacific region recorded losses of $2.1 trillion.

Latin America is currently the outlier with a total wealth increase of $2.4 trillion, assisted by an average 6 percent currency appreciation against the U.S. dollar.

Heading the list of losses in market terms in 2022 is the United States, followed by Japan, China, Canada and Australia.

In contrast, Russia, Mexico, India, and Brazil saw the largest wealth increases last year, according to the report.

Switzerland continues to lead the list regarding wealth per adult, followed by the United States, Hong Kong, Australia, and Denmark, despite sizeable declines in average wealth since 2021.

In terms of markets with the highest median wealth, Belgium is at the top, followed by Australia, Hong Kong, New Zealand, and Denmark.

“Wealth evolution proved resilient during the COVID-19 era and grew at a record pace during 2021,” said Nannette Hechler-Fayd’herb, global head of economics and research at Credit Suisse.

“But inflation, rising interest rates and currency depreciation caused a reversal in 2022.”

Twenty dollar bills are counted in North Andover, Mass., on June 15, 2018. Elise Amendola/AP Photo

Wealth Held by Global Top 1 Percent

Along with a decline in aggregate wealth last year, overall wealth inequality also dropped.

The total amount of wealth held by the global top 1 percent fell to 44.5 percent in 2022, while the number of millionaires worldwide plunged by 3.5 million to 59.4 million.

However, this does take into account the 4.4 million “inflation millionaires,” who no longer qualify for the millionaire threshold if their assets were adjusted for inflation in 2022, according to the study.

Despite reporting the first major drop in wealth in 14 years, the study was optimistic for the future, by estimating a 38 percent rise in global wealth over the next five years to $629 trillion by 2027.

Global median wealth actually increased by 3 percent in 2022, in contrast to the 3.6 percent drop in wealth per adult.

Median wealth worldwide has increased 500 percent since the dawn of the 21st Century, at roughly double the pace of wealth per adult, mainly due to the economic rise of China.

The report further noted that growth in middle-income markets will likely be the primary driver of global trends.

It is estimated that wealth per adult will reach $110,270 by 2027, and the number of millionaires will hit 86 million.

The number of ultra-high-net-worth individuals is likely to reach 372,000 individuals by that year.