Global middle class wealth could reach $345 trillion by mid-2020, 38 per cent above its mid-2015 level, said a Credit Suisse report, adding that the number of millionaires could increase by 46 per cent during the period, reaching 49.3 million.

The Credit Suisse Research Institute today released its sixth annual Global Wealth Report, which focuses on how the middle class has developed since the turn of the century. It finds that the size and wealth of the middle class globally grew quickly before the financial crisis, but growth subsided after 2007 and rising inequality has squeezed its share of wealth in every region.

In its analysis, Credit Suisse has taken a new approach to defining the middle class category, using a wealth-based definition – versus an income-based one – that allows for adjustments over time to reflect inflation, and also varies across countries depending on local purchasing power.

Additional key findings of the report include:
•    Global wealth fell by $13 trillion from mid-2014 to mid-2015, due to dollar appreciation. If measured at constant exchange rates, global wealth would have risen by $13 trillion since last year.
•    The US again led the world with a substantial rise in household wealth of $4.6 trillion. China also posted a large annual rise of $1.5 trillion.
•    China now has the largest middle class with 109 million members, surpassing the USA with 92 million.
•    Wealth per adult fell by 6.2 per cent to $52,400 and is now back below the level of 2013.
•    Switzerland again ranked highest in average wealth, but fell $24,800 to $567,100 per adult.
•    A person needs just $3,210 (after debts) to be in the wealthiest half of the world.
•    Wealth inequality has continued to increase since 2008, with the top percentile of wealth holders now owning 50.4 per cent of all household wealth.  
•    The top 1 per cent of wealth holders now owns half of all household wealth.

Michael O’Sullivan, chief investment officer for the UK & EEMEA, Private Banking and Wealth Management at Credit Suisse said: “We are clearly in a growth industry, with wealth set to continue its upward trajectory. By our estimates, wealth could grow at an annual rate of 6.6 per cent, reaching $345 trillion in 2020.”

“Furthermore, the number of dollar millionaires could exceed 49.3 million adults in 2020, a rise of more than 46.2 per cent, with China likely to see the largest percentage increase, and Africa as the next performing region. Overall, emerging markets account for 6.5 per cent of millionaires and will see their share rise to 7.4 per cent by the end of the decade.

“High-income economies will still account for the bulk of new millionaires, with 14.0 million adults entering this category. Millionaire net wealth is likely to rise by 8.4 per cent annually, as more people enter this segment. Emerging markets will likely account for 9.1 per cent of millionaire wealth in 2020, 1 per cent above current levels,” he added.

Credit Suisse Research Institute’s Markus Stierli said: “From 2008 onwards, wealth growth has not allowed middle-class numbers to keep pace with population growth in the developing world. Furthermore, the distribution of wealth gains has shifted in favour of those at higher wealth levels. These two factors have combined to produce a decline in the share of middle-class wealth.”

The outlook for wealth

Wealth is set to continue its upward trajectory and could grow at an annual rate of 6.6 per cent (including inflation), reaching $345 trillion in 2020. This is below last year’s projection of 7 per cent, but not outside historical norms. Between 2000 and 2007, wealth grew at a sizeable pace of 9.4 per cent.

Following the financial crisis of 2008, its pace has admittedly been tepid (just 4.4 per cent annually), but this is in large part due to the strong dollar that has been appreciating at an annual pace of more than 1 per cent versus other currencies (weighted according to wealth). To put this in context, wealth is currently at $250.1 trillion, 336 per cent the projected global GDP for 2015 (which the IMF estimates at $74.6 trillion) and it could rise to 352 per cent of GDP by 2020 (forecast at $ 98.1 trillion), approximately in line with its 15-year average of 349 per cent.

Among the regions, China is likely to see the largest percentage increase, with the number of millionaires increasing by 74.0 per cent. Africa will likely be the next performing region, with millionaires rising by 73.0 per cent, albeit from a lower base.

Overall, emerging markets (low- to middle-income economies) account for 6.5 per cent of millionaires and will see their share rise to 7.4 per cent by the end of the decade. High-income economies will still account for the bulk of new millionaires, with 14.0 million adults entering this category.

Millionaire net wealth is likely to rise by 8.4 per cent annually, as more people enter this segment. Emerging markets will likely account for 9.1 per cent of millionaire wealth in 2020, 1 per cent above current levels. – TradeArabia News Service