Growth in global financial wealth screeched to a halt in 2018

Factor in the effect of a rebounding US dollar and asset values declined 1.6 per cent last year, according to an expert.
Factor in the effect of a rebounding US dollar and asset values declined 1.6 per cent last year, according to an expert.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Gains in global personal wealth ground to a near-halt in 2018, rising just 1.6 per cent for the weakest growth in five years.

The slowdown is a steep drop from the 7.5 per cent gain in personal global wealth in 2017, and the 6.2 per cent compound annual growth rate from 2013 to 2017, according to an analysis by Boston Consulting Group released on Thursday (June 20).

Factor in the effect of a rebounding US dollar and asset values actually declined 1.6 per cent last year, wiping out any gain, said Anna Zakrzewski, global leader of BCG's wealth-management practice.

"For the first time since 2008, we saw wealth growth was negative when you take into account all the factors," she said.

Still, the amount of personal financial wealth sloshing around the world remains enormous: US$206 trillion, according to BCG's tally.

Although overall growth was down, some regions did well. Increases ranged from 8.9 per cent and 7.1 per cent for Africa and Asia, respectively, to anemic gains of 0.6 per cent for Western Europe and 0.4 per cent for North America.

The ranks of millionaires continued to swell, increasing 2.1 per cent in 2018 to 22.1 million. BCG estimates that by 2023 there will be 27.6 million globally. Switzerland boasts the greatest density of millionaires among its adult population at 7.5 per cent, followed by the US.

From 2018 to 2023, the global ultra-high-net worth crowd will see the fastest increase in their personal wealth, with a compound annual growth rate of 7.8 per cent, BCG projects. The group represents 7 per cent of total wealth, according to BCG, as does the next lower wealth tier - those with US$20 million to US$100 million.

From 2019 through 2023 wealth worldwide will grow at a compound annual rate of 5.7 per cent, according to BCG. Asia, however, is expected to see wealth rise by a compound annual growth rate of 9.4 per cent to US$58.2 trillion by 2023.

Latin American wealth is projected to expand 8.2 per cent during that period, while Africa and the Middle East combined are expected to climb 7.7 per cent.

Estimates of how much money sits in offshore centers varies, but BCG estimates that US$8.7 trillion of the world's wealth crosses borders. Over the past five years, that pool of money has been expanding by 5 per cent a year.

Over the next five years, China will account for roughly one-third of the flows into offshore financial centers, with most of it likely to end up in Hong Kong and Singapore, Ms Zakrzewski said.

The two cities, and perhaps the US and United Arab Emirates, "have the strongest exposure to growth markets as offshore financial centers," and should expand at annual compound rates of 7 per cent to 8 per cent, she said.

Asia's total personal wealth is expected to reach US$58 trillion by in 2023, which would leapfrog it over Western Europe's projected US$53 trillion.