Global Wealth Sees First Decline Since 2008 Financial Crisis, Says Joint Credit Suisse and UBS Report

In an unprecedented turn of events, the world experienced a decline in global wealth last year, marking the first such downturn since the 2008 financial crisis, as indicated by the annual Global Wealth Report jointly published by Credit Suisse and UBS.

The report, unveiled on Tuesday, revealed a noteworthy contraction in total private wealth, which registered a decrease of 2.4% to $454.4 trillion by the end of 2022. Furthermore, the measure of wealth per adult fell by 3.6%, amounting to $84,718. The authors of the report, including economist Anthony Shorrocks, attributed a significant portion of this decrease to the appreciation of the U.S. dollar against multiple other global currencies.

The analysis underlined that the decline was predominantly concentrated in more affluent regions, specifically North America and Europe, which collectively accounted for a substantial portion of the contraction, summing up to $10.9 trillion in total. High inflation and the strengthening U.S. dollar were identified as primary catalysts for the wealth slump in 2022.

Shorrocks commented on the trends, stating, “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.” He further elucidated that financial assets played a pivotal role in the decline, while non-financial assets, particularly real estate, demonstrated resilience despite escalating interest rates. However, Shorrocks highlighted the potential for a reversal in the relative contributions of these asset classes in 2023, especially if higher interest rates lead to a decline in house prices.

Among the most impacted nations in terms of market losses were the United States, Japan, China, Canada, and Australia. Conversely, the report highlighted that Russia experienced the most significant gains in wealth, followed by Mexico, India, and Brazil.

This decline in global wealth followed a surge in wealth during the preceding year. Nannette Hechler-Fayd’herb, the Global Head of Economics and Research at Credit Suisse, acknowledged this, stating, “Wealth evolution proved resilient during the COVID-19 era and grew at a record pace during 2021.” However, factors such as rising inflation, increased interest rates, and currency depreciation were cited as contributors to the reversal observed in 2022.

Despite this downturn, the Global Wealth Report maintains a positive outlook for the future, forecasting a notable resurgence in global wealth over the next five years. The report anticipates a remarkable surge of 38% in global wealth during this period, signaling a potential return to growth after the challenging economic landscape of recent times.

While the global economy grapples with the implications of this unprecedented decline in wealth, experts and policymakers will likely closely monitor these trends to guide their strategies in navigating the complex dynamics of the financial landscape.