Global household wealth holds steady amid pandemic: report

GLOBAL household wealth has held steady amid the crisis wrought by Covid-19, given timely relief measures from governments around the world.

With this, households overall are now in a better position to spur recovery, as compared with the situation during the global financial crisis in 2008, Credit Suisse's latest global wealth report has found. This also comes as rapid wealth growth in pre-pandemic times also helped cushion the impact from the latest economic fallout.

That said, these positive impacts on wealth may soon wear off as government assistance is curtailed and severe recession takes its toll. At this point, it is too early to fully assess the impact of Covid-19 on global wealth distribution. But the report also said it is easier to see that particular groups - including the low-skilled, and small businesses - have suffered from this crisis.

"The pandemic will have important repercussions on income distribution" the report said.

"Although emergency benefits in high-income countries offset the effect to some extent, unemployment and reduced economic activity will almost certainly increase income inequality within countries since they tend to affect those with lower incomes disproportionately."

The onset of the pandemic resulted in a US$17.5 trillion drop in global household wealth between January to March, mainly led by the sharp worldwide decline in equity prices. But when the commitment of governments and central banks "became apparent", equity prices began to rise, said Anthony Shorrocks, economist and co-author of the report.

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Consequently, total wealth rose to US$400 trillion by end-June, about US$1 trillion or 0.3 per cent more than the start of the year. This is off the strong growth in 2019, when total global wealth rose 10 per cent to US$399.2 trillion. Wealth per adult was up 8.5 per cent to US$77,309, cracking an all-time high, data from the report showed.

Governments and central banks have learned the importance of credit arrangements and quantitative easing during a severe crisis, said the report.

Lower interest rates and relaxed credit conditions have supported asset prices, including house prices and the valuations of pension entitlements.

There has also been massive economic support involving the transfer of trillions of US dollars from the government sector to the private sector, and ultimately to households.

To add, restricted consumption opportunities have translated into higher savings and consequently into higher financial assets or lower debts.

"Governments learnt from the experience in 2008 and responded promptly. Everything that should have been done in 2008 has been done now in the pandemic, and that helped to stabilise household wealth," said Prof Shorrocks at a media briefing on Thursday.

The bank expects subsequent economic recovery in 2020 to see limited impact, as reduced gross domestic product (GDP) and rising debt will result in long-term damage.

In Singapore, average wealth per adult has fallen by about US$7,000 over this period.

Without the pandemic, Credit Suisse's estimate of global wealth per adult would have risen from US$77,309 to US$78,376. Some industries, especially those in tech and other "new economy" sectors, have seen increased business and a strong rise in stock prices amid the crisis. Wealth has risen fast for a handful of top billionaires who lead the major companies in this sector.

For example, Amazon's Jeff Bezos saw his wealth rise from US$113 billion to US$165 billion from March to June this year. Facebook's Mark Zuckerberg's wealth went up from US$55 billion to US$84 billion.

These increases far outstrip the average rise of 21 per cent among the world's top 1,000 billionaires, according to the report. A rise in the relative wealth of countries that specialise more in those activities, particularly China, is also expected.

By contrast, billionaires whose wealth is tied to "old economy" sectors that have suffered most from lockdowns, such as retail business and personal services, have fared less well.

"These experiences will be echoed, more modestly, by ordinary investors who put their money into the new economy and by the owners of businesses linked to the growth sectors," said the report.