UAE loses a quarter of its millionaires in one year

The number of UAE’s high net worth individuals (those with $1 million or more in financial assets) declined by 24.8 per cent to 41,324 in 2011 from 54,971 in 2010, according to just released second annual Global Wealth Report by Credit Suisse Research Institute (CSRI).

The CSRI report reckons it will take the country another five years to gain back the same number of millionaires that it lost last year, and expects the number of UAE millionaires to reach 54,000 in 2016.

According to the earlier World Wealth Report, released in June by Merrill Lynch Global Wealth Management and Capgemini, the population of UAE millionaires was more than 66,000 in 2008, taking the total tally of UAE individuals who’ve lost their ‘millionaire’ status to almost 25,000 in three years since the onset of the global economic slowdown.

The CSRI today released its second annual Global Wealth Report, which finds that Asia Pacific emerges as the key contributor of global wealth growth, accounting for 36 per cent of all global wealth creation since 2000, and 54 per cent since January 2010.

Total global wealth has increased 14 per cent from $203 trillion in January 2010 to $231 trillion in June 2011. Emerging markets remain the main wealth growth engine, with the fastest growth seen in Latin America, Africa and Asia.

In the next five years, global wealth is expected to rise by 50 per cent to $345 trillion and wealth per adult to increase 40 per cent to reach $70,700, led by growth in emerging markets. The report finds that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio than found in mature economies. Ageing is also expected to increase the demand for financial assets relative to real assets like housing.

In the Middle East and North Africa (MENA) region, Qatar recorded the highest average wealth per adult of $146,623 in 2011, a rise of 456 per cent from 2000 while Kuwait followed closely with $134,592, rising 156 per cent from 2000.

The UAE was placed third in the region with $115,774, up 104 per cent since 2000. Among the largest economies in the region, Saudi Arabia’s average wealth per adult rose 56 per cent from 2000 to reach $35,959 while Egypt’s wealth per adult climbed 47 per cent to touch $10,421.

While the average wealth per adult of many MENA countries saw substantial growth in 2011 compared to the past year, Egypt was one of the countries for which growth remained stagnant. However, in terms of total wealth, Egypt, with an estimated $0.5 trillion, ranked just behind Saudi Arabia with $0.6 trillion.

The report reconfirms that “these are times of unprecedented economic change, and a radical reconfiguration of the world’s economic order is taking shape. Emerging markets are important drivers of the global recovery and remain the key growth engines of global wealth,” said Credit Suisse’s Asia Pacific CEO Osama Abbasi.

“Credit Suisse believes this fast emerging wealth will drive new trends in consumption and investment in Asia, underpinning Credit Suisse’s proprietary thematic research initiatives on Global Megatrends of Demographics and Multipolar World. The much higher debt per adult level in Europe versus Asia, together with the much higher wealth growth rate in Asia versus Europe, suggests there may be scope for significant mutual collaboration to help mitigate the euro debt crisis,” added Giles Keating, Global Head of Research for Private Banking and Asset Management, Credit Suisse and a member of the Credit Suisse Research Institute Operating Committee.

The Credit Suisse report claims to analyse the wealth distribution of all the 4.5 billion adults in the world in more than 200 countries, using a rigorous and independent research approach.

Going forward, the US is expected to remain the largest wealth generator in the world with total household wealth of $82 trillion by 2016. China is expected to replace Japan as the second wealthiest country, with total household wealth increasing by $18 trillion to reach $39 trillion in 2016, compared to $31 trillion for Japan.

They will be followed by France and Germany both with $20 trillion. The middle segment of the wealth pyramid with wealth between $10,000 and $100,000 per adult, while accounting for 24 per cent of adults in 2011, is expected to rise to 31 per cent in 2016. “We also expect an increase in the proportion of adults with wealth above $100,000 from 8.8 per cent in 2011 to 10.9 per cent in 2016,” the report adds.

Over the next five years, wealth of emerging economies is expected to leapfrog the developed world, due to their more promising growth prospects. Wealth in China and Africa is projected to rise by over 90 per cent to $39 trillion and $5.8 trillion in 2016 respectively, while wealth in India and Brazil are forecast to more than double by 2016 to $8.9 trillion and $9.2 trillion.

The report compares the projected increase in wealth in the fastest growing emerging economies in the next five years, against the growth of wealth in the US over the course of the 20th century, forecasting the dramatic leapfrogging of emerging economies.

Total wealth in China is currently $20 trillion, equivalent to that of the US in 1968. In the next five years, it is projected to reach $39 trillion, a level that the US achieved in 22 years between 1968 and 1990. At $4.1 trillion, India’s total wealth in 2011 is comparable to the US in 1916. However, it is projected to reach $8.9 trillion in the next five years, equivalent to what US achieved in 30 years between 1916 and 1946. Similarly, Brazil’s total wealth is expected to grow from $4.5 trillion in 2011 to $9.2 trillion by 2016, equivalent to level of wealth gained in the US over 23 years from 1925 to 1948.

The report also projects the number of global millionaires to rise by 17 million to reach a total of 47 million by 2016, emerging economies are expected to catch up with developed nations with significant increase in the number of millionaires.

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