Another sign that the world has moved out of the global recession is the indication that private financial wealth grew in 2013 by 14.6 per cent to reach a total of $152 trillion. This represents a significant improvement on 2012, when global wealth grew by 8.7 per cent.
The growth of private wealth was driven primarily by returns on existing assets. The amount of wealth held in equities was the key to growth, with a 28 per cent increase. In contrast, increases in bonds and cash and deposits were well behind equities, with bonds at 4.1 per cent and cash and deposits at 8.8 per cent.
While the growth in wealth was a global trend, there were some significant – and perhaps surprising – differences by region. For the second year in a row, the Asia-Pacific Region represented the fastest-growing region, though in a continuing sign of the times, not including Japan.
Private wealth in Asia-Pacific (excluding Japan) rose by 30.5 per cent to $37 trillion. Strong nominal GDP growth of nearly ten per cent in China and just over 14 per cent in India, as well as high savings rates in those countries were the principal drivers. The amount of wealth held in equities gained 48 per cent, compared with 30.4 per cent for bonds and 21.3 per cent for cash and deposits.
By contrast, private wealth in Japan rose by a modest 4.8 per cent to $15 trillion. But if the weak yen is taken into account, private wealth in US dollars was lower in Japan in 2013 than in 2012.
The growth of private wealth in the world’s largest economy, the USA, showed strong growth of 16.3 per cent. A weaker performance in Canada brought growth in North America as a whole down to 15.6 per cent, but this still represents over $50 trillion. This was driven by the strong growth of wealth held in equities and moderate nominal GDP growth of 3.5 per cent.
Double-digit growth was also seen in Eastern Europe, the Middle East and Africa, and in Latin America. Like Japan, Western Europe lagged behind with growth rates in the middle single digits (5.2 per cent for Western Europe). But if growth was weaker in Western Europe than in many other regions, overall wealth held up well: at almost $38 trillion dollars, it was still the world’s second richest region, after North America.
However, there is an emerging trend here from the Asia-Pacific Region (once again, excluding Japan). In 2013 it was just behind Western Europe at $37 trillion dollars; but as recently as 2008, Asia-Pacific had 50 per cent less private wealth then North America. Assuming constant consumption and savings rates, it is predicted that by 2018 Asia-Pacific (excluding Japan) will overtake North America, with projected wealth of $61 trillion to North America’s $59.1 trillion. The projection for Western Europe for 2018 is $44.6 trillion.
By comparison with North America, Asia-Pacific and Western Europe, private wealth in Eastern Europe in 2013 was a modest $2.7 trillion. But this represented a significant rise of 17.2 per cent, notably driven by growth of 21.9 per cent in Russia, where wealth held in equities returned 22.6 per cent, albeit boosted by international rather than local stocks. GDP growth in Russia, though, was relatively weak at 6.7 per cent, just over half the 2012 figure of 12.3 per cent. It is estimated that private wealth in Eastern Europe will grow to $4.5 trillion by the end of 2018. But much will depend on whether current tensions between Russia and Ukraine will be resolved peacefully in the near future.
