Global Financial Wealth Market Sees First Decline In More Than Decade: Report As per the report, the decline is expected to be short lived, with a 5% rebound to $267 trillion expected in 2023
By Teena Jose
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BCG's 23rd Annual Global Wealth Report released on Tuesday, titled as 'BCG Global Wealth Report 2023: Resetting the Course', has stated that the value of global financial wealth shrank for the first time in 15 years in 2022, declining by 4% to $255 trillion. As per the report, drivers include spiking inflation, the resulting rise in interest rates, and poor equity market performance against the backdrop of geopolitical uncertainty sparked by the war in Ukraine. However, the decline is expected to be short lived, with a 5% rebound to $267 trillion expected in 2023.
"The first downturn in the global financial wealth market since the 2008 crisis came after a 10% rise in value in 2021, which was one of the sharpest in over a decade. We expect that the improving macroeconomic outlook and rebound in stock markets will drive a return to growth in financial wealth as early as 2023, and our five-year compound annual growth rate forecast to 2027 remains a healthy 5.3%. However, the recent headwinds in the market show how important it is for industry players to future-proof now for consistent long-term growth," said Michael Kahlich, a BCG managing director, partner and co-author of the report.
Bright spots in 2022 include a 6.2% increase in the value of personal cash and deposits, as a more risk-averse approach to investments prevailed. The value of real assets, ranging from real estate to art, also rose by 5.5% to reach $261 trillion. Overall, that brought total absolute global wealth to $516 trillion in 2022, a 1% increase compared with 2021, the report further revealed.
Speaking about the report, Mayank Jha, managing director and partner, Boston Consulting Group (BCG) said that, ""India has bucked the global headwinds of wealth creation, led by equity markets which have performed better than its global peers last year, leading to 8% increase in financial wealth last year. Over the last 20 years, wealth in financial assets in India grew at 15% CAGR v/s a global growth rate of 6%. India's equity markets will continue to be a strong wealth creation opportunity, today representing 24% of financial wealth, but will increase to 28% of all financial assets by 2027. It's not surprising that India (8%) and China (9%) will record the strongest growth rates among leading global markets, which will collectively create $74 trillion in wealth over the next five years."
